Turkiye: Imported ferrous scrap prices drop by $3/t w-o-w amid weak domestic steel market

Trading activity in the Turkish import scrap market remained subdued as mills aimed for lower prices as the negotiation process was slow, with Turkish producers delaying import bookings due to limited demand for finished steel. Several mills have revised local scrap prices downward, signaling their reluctance to agree to higher prices. The market is quiet, with importers assessing the situation after securing the necessary material volumes. Sellers maintained firm indicative offers despite a pause in buyers' interest from Turkish mills. The approaching holiday season contributed to mixed near-term sentiment.

Seller targets and indicative offers for the US-origin HMS (80:20) stood at $430/t CFR, while the EU-origin seller targets were a minimum of $420/t CFR. An offer for Baltic-origin HMS (80:20) was reported at $423/t CFR.

Market sources reported a continued pause in deal activity, anticipating no fundamental changes in the market ahead of the holiday season. Turkish mills observed the absence of demand for finished steel sales and scrap, citing high logistics costs. While it is perceived as a buyers' market, sellers were attempting to hold their ground, with prices hovering between $420-$425/t CFR. Futures traders expect a slight price correction, as reflected in the sharp drop of the futures contract for Turkish imports of ferrous scrap on LME.

SteelMint's assessment for the US-origin bulk HMS (80:20) declined by $3/t w-o-w, reaching $424/t CFR Turkiye.

The scrap-to-rebar spread was assessed at $175-180/t as export offers for rebar hovered around $600-605/t on a FOB basis.

Domestic market update-

In the domestic scrap market of Turkiye, the price trend shifted as several mills announced a TRY 200-400/t decrease in purchase prices for local scrap recently. The correction amounted to a loss of $8-15/t in US dollars, varying by asset and material grade. The main reason for the correction is the lack of support from finished steel demand, leading producers to lower bids for raw materials to create room for reducing rebar prices. While some steelmakers maintained their domestic scrap prices, the ongoing depreciation of the national currency resulted in a decline in their dollar-based quotes by $1-2/t.

Rebar market: High prices pose a significant challenge, making Turkish rebar less competitive. Turkish steelmakers continued to reduce rebar supplies to foreign markets in October, with cumulative tonnages nearly halved since the beginning of the year. MENA remained the primary destination, although the volume decreased in favour of Europe and sub-Saharan Africa. In October, Turkiye exported 309,286 t of rebar, marking an 18.3% decrease from October 2022 and a 29% decline, sequentially.

Turkish steel producer Kardemir has opted to maintain its wire rod prices, holding steady at USD 660/t EXW for the 5.5 mm SAE 1006 grade and USD 650/t EXW for SAE 1008-1010 grades. While these prices show an increase of USD 35-40/t compared to rates three weeks ago, reflecting the upward trend in scrap prices, the current market faces pressure due to sluggish steel sales. Sellers are reluctant to negotiate amid reduced scrap collection during the winter season.

Interest rate: Today, Turkiye's central bank increased its key interest rate by 250 basis points to 42.5%, meeting expectations to combat soaring inflation. The move, pushing the policy rate to a two-decade high, aims to bring real rates into positive territory based on end-2024 inflation expectations. The central bank, pledging to conclude the aggressive tightening cycle promptly, anticipates inflation to peak at 70-75% in May before easing to around 36% by the end of next year. The Turkish lira remained relatively stable after the announcement.

Turkish consumer confidence showed improvement in December, both on a monthly and yearly basis, inching closer to an optimistic outlook zone (starting at 100 points). Despite the positive trend, substantial spending remains deferred, impacting support for sectors like construction and industry, including steel producers. The December seasonally adjusted consumer confidence index reached its highest point since July 2023. However, consumers continue to exercise caution, reflected in a 20.6% y-o-y decrease in house sales (93,514 units) and a modest 4% growth in domestic car output (138,735 units) in November 2023. Inflation, standing at 61.98% in November, and a weakened national currency further contribute to the economic landscape.

Outlook: Rebar sales in the Turkish domestic market are witnessing a downturn, prompting an anticipated price softening of at least $15/t in the upcoming days. Turkish mills might aim for deals below $410/t CFR; however, these levels are deemed unacceptable by the European and US recyclers.