Spike in electricity costs force Turkish mills to lower scrap bids

Turkish scrap import prices decreased w/w

Turkish scrap prices fell last week, down to $371 /t CFR for HMS 1/2 80:20 (-$25 /t w/w, -$21 /t m/m). Trading activity has remained thin.

Scrap prices(1) $/t12-Aug19-Aug26-Aug02-Sep09-Sep
HMS 1/2 80:20 CFR Turkey392395393396371
Shredded CFR Turkey412415413416391
Notes: (1) weighted average of known transactions from all points of origin.

After the announcement of a sharp hike in electricity and gas prices for industrial use, Turkish finished steel export prices rose sharply w/w, up by $30–55 /t FOB depending on products. Steelmakers exposed to the risk of energy cost spike seek to pass through these costs. However, demand seems only to have become weaker and outweighs current supply cutbacks. More and more EAF producers are choosing to idle facilities, exacerbating downward pressure on scrap demand and prices.

In the Asian scrap market, some deals were done at $410–420 /t CFR Vietnam for H2. Bearishness in the finished steel market and falling prices kept steel buyers only requiring a reasonable amount of inventory for their needs. As a result, mills are facing thin margins and are only purchasing limited amount of scrap.

Outlook: Turkish scrap prices may weaken with further production cutbacks

The usual post-summer holiday restocking activity for steel is likely to be counterbalanced by the continued weakness of demand and the sufficiency of existing inventory levels. Moreover, electricity costs will remain a serious pressure point, particularly given Russia has now announced the indefinite closure of Nordstream 1. If the situation of high electricity costs continues, more EAFs will be idled, and  those which are currently idle will see their downtimes extended. Scrap demand and prices may continue to fall in the near term.

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