NEW YORK Two Turkish steel mills bought three bulk scrap cargoes from Europe and Russia this week, turning the spotlight on the United States as the market awaits the next price level for U.S. scrap.
Turkey, the largest offshore consumer of U.S. scrap, has booked only one cargo off the East Coast in the past five weeks, and this weeks bulk cargo sales from the Baltic and Black seas are expected to force a new market level for scrap prices in a weak demand environment.
Market participants said that a Baltic Sea cargo was booked to a Turkish mill at an average price of $383.50 per tonne c.i.f. Turkey for a full cargo of an 80/20 mix of No. 1 and No. 2 heavy melt scrap, with a 10-percent cargo allowance for bonus scrap. A second Baltic Sea cargo reportedly was booked by the same buyer from a different supplier at an average price of $382.50 per tonne c.i.f. Turkey for 20,000 tonnes of HMS 1&2 (80:20) and 8,000 to 9,000 tonnes of shredded scrap.
Both sales indicate a price level of around $380 per tonne for HMS 1&2 (80:20), according to some sources, who added that the same heavy melt package from the United States typically trades at or close to prices from the Baltic Sea. However, their expectations that U.S. prices for HMS 1&2 (80:20) could drop about $5 from a sale last week to around $380 per tonne c.i.f. Turkey was not a consensus view, with othersincluding one buyer for a Turkish producerindicating that U.S. exporters will fight to keep sales prices at around $385 per tonne.
"(The European sales) will hold the market for sure, and there will be more bookings soon. U.S. 80:20 shouldnt be less than $385 (per tonne)," said a buyer for a large Turkish steel producer.
One U.S. exporter said East Coast exporters so far have resisted bids of $380 per tonne from Turkish mills, with one exporter apparently countering with an offer of $388 per tonne for HMS 1&2 (80:20) and other U.S. offers reported at $385 per tonne.
The exporter, however, speculated that U.S. prices could weaken to $380 per tonne, or "closer to it," soon.
One European exporter said Turkeys mill buyers expect prices from U.S. exporters to go down to $380 per tonne or lower. "If not, I guess they are ready to idle mills, buy billets and continue to supply from cheaper sources," he said. "U.S. prices will probably go down, driven mainly by domestic dynamics."
A second European exporter had a similar view. "Due to low billet prices from Russia, the Turkish buyers are now importing billets to make rebar instead of using their own furnaces and buying scrap. If demand for scrap improves, then the market can move up again by about $10," he said, adding that he expects Turkish mills to step into the scrap market next week for May deliveries.
The third bulk cargo was booked from a Black Sea port at an average price of $384 per tonne for a 35,000-tonne cargo of A3 and bonus scrap.
A source in that region said he expects the price to hold. "I think we are at the bottom. Black Sea (exporters) sold many cargoes on downtrend speculation (and some) cargoes will delay. The ones who have cargoes are not stressed to sell at the bottom levels, especially with no sales from the U.S.," he said. "I think very soon we are going to see some more demand, and the market can easily go up $5 to $10."