Last week the trends for Chinese iron ore prices and Turkish scrap values diverged again: iron ore recovered from the recent fall to return to level of around $90/tonne cfr China, while Turkish scrap continued to correct downward. Going forward, the main question among market participants is whether the latest recovery in sentiment in China can also support a recovery in Turkish scrap prices. Or, on the other hand, whether the persistent difficulties affecting the Turkish steel sector will force the two raw materials to continue to diverge, a feature for most of this year.

Turkish mills’ demand for scrap has not yet recovered. Most mills have some difficulty in selling their finished steel products in both local and export markets and are thus delaying their scrap purchases despite a pressing need to replenish their scrap inventories.

Although deep-sea scrap suppliers last week were trying to maintain their offer levels for HMS 1&2 80:20 at $270/t cfr Turkey, negotiations ended at much lower levels. A Turkish producer bought an ex-US cargo consisting of 17,500 tonnes of HMS 90:10 at $261/t, 6,000t of shredded at $263/t, and 6,500t of P&S scrap at $268/t. The HMS 80:20 equivalent of this cargo was $258/t cfr Turkey.

A Turkish mill explained that "... all deep-sea suppliers are ready to sell cut grade at $270/t cfr but they cannot find a single buyer at this level. Nevertheless, we think that ex-Baltic and ex-US suppliers will not accept levels below $260/t cfr.” Considering the previous ex-US HMS 80:20 deal at $270/t cfr Turkey last week, even Turkish steel producers were not expecting such a sudden drop in prices.

As the holiday season is over in the main scrap supplying regions, demand from their local markets is expected to increase. The decrease in USD/EUR parity may provide EU scrap suppliers with an advantage for their export sales going forward. A real recovery in prices achieved from Turkish buyers is difficult to envisage however.