iron ore vs scrap imparity hit mini-mills in turkey
TRANSCRIPT
Turkish mills should undercut ferrous scrap prices by raising billets purchases
03 June, 2015
Andrey Pupchenko, Deputy Managing Director, Metal Expert
Contents
1) Turkish mini-mills keep capacity utilization rather high, thus overstocking the rebar market
2) High scrap consumption amid decreasing stocks pushed up scrap prices
3) Stiff competition in the rebar market means low export prices could not compensate the growth in expenses
4) Margins of Turkish exporters is almost zero due to low rebar prices
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© Metal Expert
Turkish mini-mills keep capacity utilization at rather high level, thus overstocking the rebar
market
Rebar capacity utilization in Turkey
© Metal Expert
In April-May Turkish mills had to accept higher scrap prices due to re-stocking
- 250'000 t
Dynamics of scrap inventory in Turkey
Turkish mini-mills have positive and sustainable margin in local market only
© Metal Expert
The fundamental factor:
scrap should be cheaper otherwise Turkish mills could not compete with BOF-based longs
suppliers (from China) and EAF-based suppliers fed by DRI/HBI (from the GCC)
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© Metal Expert
UAE billets market
Turkish mills lose competiveness
0
50
100
150
200
250
0
100
200
300
400
500
600Jan.1
3
Mar.
13
May.1
3
Jul.13
Sep.1
3
Nov.1
3
Jan.1
4
Mar.
14
May.1
4
Jul.14
Sep.1
4
Nov.1
4
Ja
n.1
5
Mar.
15
Ma
y.1
5
$/t
Turkish billet (EAF steel/scrap)
Chinese billet (BOF steel)
The average difference in costs doubled
© Metal Expert
Metal Expert assessment of the price parity in iron ore and ferrous scrap: if iron ore price is 60 $/t CFR, scrap
should be 230 $/t CFR Turkey, assuming coking coal price is 90 $/t FOB Australia
40
45
50
55
60
65
70
75
80
85
211 216 221 226 231 236 241 246 251
Iro
n o
re c
on
ce
ntr
ate
(6
1.5
%),
Ch
ina
, c&
f fr
om
A
us
tra
lia
, $/t
Ferrous scrap, Turkey, c&f from USA, $/t
The structure of Turkey's ferrous scrap import
Scrap from the US contributes only a fraction of Turkey's market, although HMS 1&2 (80/20) is still
the benchmark
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37%
13%20%
29%1%
2013
40%
23%
14%
20% 3%
2015
Western Europe
CIS
Eastern Europe
North America
Others
340
390
440
490
540
590
Ja
n.1
3
Fe
b.1
3
Ma
r.1
3
Apr.
13
Ma
y.1
3
Ju
n.1
3
Ju
l.13
Aug
.13
Sep
.13
Oct.1
3
No
v.1
3
De
c.1
3
Ja
n.1
4
Fe
b.1
4
Ma
r.1
4
Apr.
14
Ma
y.1
4
Ju
n.1
4
Ju
l.14
Aug
.14
Sep
.14
Oct.1
4
No
v.1
4
De
c.1
4
Ja
n.1
5
Fe
b.1
5
Ma
r.1
5
Apr.
15
Ma
y.1
5
$/t
Import prices of billet from CIS to Turkey, crf
Square billet cost (EAF steel) dynamics in Turkey
Since last December, CIS billet is a low-cost alternative to local billet produced in Turkey
from American scrap
© Metal Expert
Turkey's billet import dynamics © Metal Expert
0
200
400
600
800
1000
1200
1400
Q1
14
Q2
14
Q3
14
Q4
14
Q1
15
'00
0 t
Plus 470'000 t
CIS-origin billets expanded its presence in the Turkish market
There are 2 options for Turkish mini-mills
1) to reduce scrap consumption (especially from the US) by expanding billets purchasing (from Russia,
Ukraine, China, of course, and… Iran)
2) to accept raising scrap prices and operational losses. The possibility to cover growing expenses by raising
finished products prices is limited
© Metal Expert
© Metal Expert
31
5
31
5
24
9
25
8 26
3
28
6
27
0
25
5
24
0
230
240
250
260
270
280
290
300
310
320
De
c.1
4
Ja
n.1
5
Fe
b.1
5
Ma
r.1
5
Ap
r.1
5
Ma
y.1
5
Ju
n.1
5
Ju
l.1
5
Au
g.1
5
$/t
* - HMS 1&2 (80:20)
Price forecast of US scrap* imports into the Turkey, C&F
Metal Expert's ferrous scrap forecasts (based on the 1st option)
Questions? Contact us: Andrey Pupchenko Metal Expert +38 (056) 370 12 07 (ext. 160) [email protected]
Metal Expert provides exclusive data in monthly report World Steel Markets
- [NEW] Rebar output by producer in Turkey
- Ferrous scrap inventory at Turkish mills (actual for the time of
publishing – every mid-month)
- Margin assessment (market price minus estimated costs) for main export destinations and domestic deliveries
- Comparison of in-house billet production cost (using imported scrap) and prices for billet imports from CIS
- The forecasts of ferrous scrap consumption and prices for the next three months
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