It seems Turkiye, the largest ferrous scrap importer,
is no longer driving prices in this domain. Its prices were traditionally
followed by the three heavyweight importers -- India, Pakistan and Bangladesh.
Data maintained with BigMint reveals that Turkiye has increasingly become
decoupled from South Asian scrap buyers while Bangladesh is emerging as a
driving force.
Price trends
Bulk scrap import
price data seen over the past six months reveal that prior to December 2023,
India and Pakistan paid $25-30/tonne (CFR west coast of India and CFR Qasim
respectively) higher compared to Turkiye. Bangladesh paid an even higher
premium of $30-35/t. For instance, over August-December, 2023 when Turkiye paid
an average $387/t CFR Iskenderun for US-origin HMS 80:20, India paid $30/t
higher at $417/t CFR west coast for shredded from the EU. Pakistan coughed up
$37/t extra at $424/t while Bangladesh paid a steep premium of $48/t when
pitted against Turkiye.
In Bangladesh, the premium over the Turkish benchmark
significantly decreased by $5-10/t CFR. This drop can be attributed to the
freight rate hike, which increased the cost of imported scrap, making these
unviable for buyers here especially since finished steel demand is very dull,
reducing the need for scrap metal.
India's prices fell
even further, with inquiries declining by $15/t and bids by $20/t compared to
Turkish levels, again due to bleak steel demand and steep freights.
Factors behind the decoupling
The decoupling
indicates that each market is increasingly influenced by its own dynamics and
resorting to need-based buying, amid lower demand and exports.
Turkiye swayed by own market dynamics: Turkiye's crude steel production in CY'23 witnessed a 4%
drop to 34 mnt as against 35 mnt in CY'22 owing to dull finished steel demand
amid a weaker lira, high inflation and interest rates that impacted domestic
purchasing power. The lira eroded 33% and inflation was at 64% in 2023. Its
export market also witnessed a sluggish year due to weaker currencies and sea
route disruptions because of the Israel-Hamas wars.
High energy prices,
followed by high interest rates to quell the same and lack of demand from the
EU forced Turkish mills to lower crude steel output and in tandem scrap buying.
Imported scrap volumes declined marginally in H2'CY23 to 9.19 mnt as against
9.63 mnt in H1.
Imported scrap prices
in January 2023 had hit a one-year low at $412/t CFR compared to January 2024's
$421/t.
Geo-political impact: The
Red Sea incident (which erupted on 19 October, 2023) hiked freight rates as
ships had to detour. This led to longer voyages, supply chain disruptions and
extra security charges for vessels, impacting freight rates upwards. Bulk scrap
prices into Turkiye witnessed a 16% increase in January 2024 at $421/t compared
to the $362/t levels in October 2023.
On the other hand, in
South Asian countries like India, Pakistan and Bangladesh, the container scrap
market witnessed a dull phase amid weak finished steel demand. Suppliers were
uncertain of clinching lucrative deals amid higher freight charges and sluggish
response/inquiries.
Enquiries from Europe
and routes via the Red Sea dropped significantly, which made South Asian buyers
worried about their future bookings of EU-origin material.
Red Sea crisis makes offers unviable for Bangla buyers: Bangladeshi buyers were paying up to $30-35/t over the
Turkish prices prior to the freight rate hike. However, post-the Yemen/Red Sea
crisis, freights increased $15-20/t for bulk and containers, which made prices
unviable and forced them to move over to sourcing from alternate markets like
Australia, Singapore, Hong Kong, Malaysia, and the Middle East.
Bangladesh emerges as major buyer: Since the last two months, India has been out of the
market due to low scrap demand and availability of cheaper domestic material.
Pakistan is already nursing low volumes and has shown wild swings, amid
political unrest, dull steel demand and higher raw material prices. That has
left Bangladesh as the major buyer at present. It's offers are often influenced
by the scrap buying prices of Indonesia, Vietnam and Taiwan. However, these
three Southeast Asian countries have also exited the market at present because
of slack finished steel demand. Buyer interest and booking patterns from new
origins like Australia, Singapore, and Malaysia are driving current pricing
trends in Bangladesh.
Indian buyers prefer domestic scrap: Indian buyers stayed away from the imported scrap market
because it was more expensive compared to domestic. The price gap between
imported and domestic widened from INR 185/t ($2/t) in August to INR 2,885/t
($35/t) in January 2024.
Steel mint