Turkiye: Imported ferrous scrap price decline; near term outlook soft

Turkish deep-sea imported ferrous scrap prices have experienced a notable decline w-o-w. Sentiments have deteriorated as prices in adjacent markets have fallen sharply. Turkish mills are not in a hurry to purchase scrap as finished steel sales are low at present. Thus, scrap buyers need time to evaluate the situation. Given another rebar price drop, it will be hard for the mills to accept higher scrap price levels.

"Domestic finished steel sales are yet to gain enough momentum in Turkiye to spark import interest," said a source.

Export demand for Turkish finished steel is still weak, and the banks' reluctance to take credit applications, since the presidential elections ended, is directly affecting domestic demand.

Recent deals

This week, a couple of low-priced deals were heard from the UK and Baltic region, comprising HMS (80:20) and bonus scrap.

• In a recent UK-origin deal, imported ferrous scrap prices dropped by $9/t, reaching the lowest level in 2023. A Mediterranean-based mill secured a cargo of 22,000 t of HMS (80:20) at $367/t CFR Turkiye for August shipments.
  
  
• In another Baltic-origin deal, a Mediterranean-based mill booked a cargo containing 22,000 t of HMS(80:20) and 3,000 t of bonus scrap at $368/t and $388/t on CFR Turkiye basis.
  
  

Domestic market update:

Turkish domestic scrap prices, on the other hand, are moving up despite the opposite trend in the finished steel segment. Turkish steel producers announced TRY 100-200/t increase in their purchase prices of local scrap.

The main reason behind the ongoing rise in domestic scrap prices is the mills' intention to book the raw material locally and thus local sellers are adapting the prices to the current market reality.

Turkish banks are also limiting credit applications since the elections, directly affecting domestic demand, and impacting the ability to collect enough dollars for scrap purchases.

Negative trends in rebar

Moods are mostly negative, despite overall expectations that rebar prices could increase due to the VAT rate hike. Major Turkish long steel producer ICDAS announced a $10/t decrease in its local rebar prices. The company's offers are now set at $620/t exw-Biga and $635/t CFR Marmara.

The main reason behind the downward correction is the still-subdued domestic buying activity. Other Turkish suppliers are offering rebar at around $600-625/t exw depending on the region. Additionally, offers from one Iskenderun-based company for rebar with shipment within one month decreased by around $13/t since last Thursday, to $585/t exw.

Kardemir's expansion: Turkish integrated long steel producer Kardemir's subsidiary, Kardokmak, has commissioned a forged steel facility, specialising in rolling, axles, forged shafts, and tool steel of various diameters, with a strong focus on forged railway axles.

The facility, with an annual capability of 20,000 t, recently went into operation with a $5-million investment.

Construction costs and slow demand: Currency fluctuations, along with high-priced inputs, continued to drive construction costs up in Turkiye in May. The May construction cost index increased by 47.95% y-o-y with building materials cost gaining 33.55% compared to May 2022 and the labour index surging by 104.83%.

These developments have weighed on the attractiveness of spending in the sector and, consequently, on steel producers who were already suffering from slow demand.

Outlook

Turkiye's CFR scrap and rebar FOB prices may continue to soften further in the near term, following the sharp downtrend in Black Sea billet prices. The expectation is that rebar prices will continue to decrease, in line with imported scrap prices in the near term.