Export market update

Over the last several months the export markets off of the U.S. Gulf and East coasts, including Canada, have held their pricing for HMS 80/20 within a tight trading range ($385-$390/mt CFR) while the domestic markets continually weakened.

Despite weakness in the rebar market in Europe and MENA, the Turkish mills struggled to obtain scrap cargoes at prices consistent with the drop in rebar pricing. The reasons for this were a relatively active U.S. scrap market last spring and what was perceived as a scrap shortage in Northern Europe. However, that has recently changed.

Last week, there were two cargoes sold to Turkey from the U.S. Gulf Coast at a price of an HMS equivalent of $380-$381/mt Delivered. These cargoes also contained a portion of either Plate & Structural or Shredded scrap at a $15/mt premium. These sales represented a $10-$11/mt decrease from the last U.S.-origin sales to Turkey. Last week Europe sold cargoes in the mid-$370/mt range.

All of this has come on the heels of large billet sales to Turkey, mainly from China. The price of billets had plunged into the low $480/mt CFR range. With scrap near $390/mt delivered to Turkish mills, it made economic sense to buy billets and roll them into rebar. Also, this would lessen their reliance on scrap and could soften prices on future purchases. It looks like this may have worked to a limited extent.

To be clear, billet imports can never take the place of scrap in Turkey to any great extent. After all, if you have investments in EAFs, you can risk running them under capacity and achieve the planned financial results. Plus, those billet prices have increased lately. But the Turkish mills have achieved their objectives with these purchases.

So, what will be the effects on the export prices in the foreseeable future? RMU contacted an executive for a large North American scrap exporter for his assessment of the international market. He doesn’t view these recent price discounts as sustainable. “The prices will go back up,” he said. He mentioned billets for Turkey are not going to be available at these low prices going forward. Exporters on the Atlantic coast have not yet bought into the downward trend of $10-11/mt. Also, he feels the recent weakness in the dollar will fuel better pricing out of Europe.

One obstacle to maintaining export prices will be the strength of the U.S. domestic market. The August settlements traded sideways last week despite some expectations of increases on certain grades. Now, the sentiment has changed for September and the feeling is that things could weaken from here. There does not seem to be enough finished steel demand to support scrap prices.