Turkey being world’s largest ferrous scrap importers is a major factor governing scrap prices. Imported ferrous scrap prices in Turkey have been witnessing momentum since mid-Jul’17. Prices have gained around USD 40 in last one month and are currently assessed at around USD 356-357/MT, CFR Turkey for US origin HMS.
SteelMint has tried to analyse the facts and reasons that have resulted in sharp surge in prices.
1. Surge in global billet prices – After government ordered shut downs to induction furnaces in order to curb pollution, billet supply in China suffered a set back. The mills closed were heard to have produced nearly 40 MnT of steel. This resulted in less supply of Chinese billets to global market, forcing in sharp hike in global billet export offers. Chinese billet export offers have climbed by USD 60/MT in a month’s time.
2. Rising coking coal prices – After operations getting normalized post Debbie cyclone and increased Chinese demand, coking coal prices have increased sharply recently and continue to remain on the uptrend. Coking coal (Premium HCC) prices have increased by USD 30 in a month’s time and are currently seen in the levels of USD 203.5/MT, FoB Australia.
3. Turkey’s increasing steel production – According to recent data released by World Steel Association, Turkey’s crude steel output has been recorded at 21.56 MnT during Jan-Jul’17 against 18.97 MnT in the same time period last year. Thus production has gone up by 14% Y-o-Y in the mentioned time span.
Out of 21.56 MnT crude steel produced during Jan-Jul’17, 14.81 MnT was produced from electric arc furnaces (EAF route) and remaining 6.75 MnT from blast furnace route. Notably steel production from EAF route has increased by around 19% Y-o-Y. Thus country’s increased scrap imports could be attributed to rising steel production through EAF route.
Steel exports from Turkey have increased considerably on yearly premises in 2017, however steel consumption in the country has recently picked up amid improved demand.
Will the uptrend in Turkey imported scrap prices continue and will imported scrap prices reach USD 400/MT mark? These level of USD 400/MT, CFR Turkey was last seen in Dec’13-early Jan’14. Prior to this the level was seen in Mar’13. SteelMint has tried to combine the steel production figures along with number of scrap trade figures along with global steel prices then and now.
|
Particulars |
Mar’13 | Dec’13 |
Jul’17 |
| Turkey Crude Steel Production in MnT |
2.97 | 2.89 | Turkey produced 3.34 MnT crude steel in Jul. |
| Turkey Steel Output Route wise | 34.6 MnT crude steel produced in Turkey in 2013 out of which 71% (24.7 MnT) share was of EAF and 29% (9.9 MnT) was of BF route. |
Out of 21.6 MnT crude steel produced during Jan-Jul’17, share of EAF was 69% (14.8 MnT) and rest 31% (6.75 MnT) share was of BF route. |
|
| Coking Coal (Premium HCC ) prices in USD/MT, FoB Australia |
162 | 135 | 203.5* |
| Iron Ore Fe 62% Fines Index in USD/MT, CNF China | 140 | 130-141 | 77* |
| CIS Billet Export Prices in USD/MT | 532 | 500 | 500-505* |
| World trade in ferrous scrap in MnT | around 95 MnT in CY13 | NA | |
*Current prices as on 25 Aug’17
Source: SteelMint Research, World Steel Association
Notably world ferrous scrap trade in CY16 declined to 86 MnT.
As per SteelMint analysis, considering iron ore & coking coal prices, cost of hot metal production cost via blast furnace route is still quite low at present comparatively to that which was in Dec’13 and Mar’13. Thus there are less chances that scrap prices may increase further in the near term.
Market participants are carrying mixed responses. Some are of the view that owing to rising steel margins and increased steel production in Turkey, scrap prices may move further but will it touch USD 400/MT, CFR mark is skeptical.
However this week, scrap trade activities in Turkey remained silent and it is expected that prices may remain range bound next week too amid less trades expected over approaching holidays.
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