Posted on 01 Dec 2015
Turkey has become a net importer of steel – a very strange phenomenon primarily driven by rising shipments of Chinese semi-finished products, slab and billet, as well as finished products such as hot rolled coil, according to a global media report.
However, prices of scrap and ore, the report said, have converged in the past two months, reducing China’s cost advantage to an extent.
This realignment of scrap and iron ore could signal some respite for Turkey, and indeed the rest of the world, from the impacts of Chinese exports in the months to come, the report said while noting other factors such as cheap labour and environmental costs in China that are at play.
In an effort to survive a very difficult price environment in which spot price of iron ore has recently fallen to a new nadir of $44 a tonne CFR cost and freight), smaller miners are trying to diversify their portfolios, with some buying up cattle and dairy businesses to cash in on rising Asian demand for other commodities, the report said.
At the same time, steel mills, it added, have been using this cost advantage, and structural supply surplus, to pour steel into the global market.
However, ferrous scrap that accounts for around a third of steel production outside China, has been comparatively overlooked by commentators, the report added.
Noting that scrap is one of the most volatile and transparent spot markets of the ferrous chain, it said the relationship between scrap and ore is dynamic and fundamental to an understanding of the steel industry.
Shifts in ratios between the two can determine the competitiveness of the blast furnace or electric arc furnace route, and hence the prospects for many steel companies and steelmakers around the world, according to the report.
Turkey, straddling the up and coming steel continent of Asia and the old man of Europe, is at the core of the world steel market which many do not realize, it said adding that Turkey is the largest importer of seaborne scrap, sourcing from regions across the world.
It is thus the global price setter, as is China for iron ore, the report mentioned. Turkey, it said, has also traditionally been the largest exporter of reinforcing bar, which is used to support concrete, making this price a key reference for construction markets in Europe, the US and elsewhere.
Turkey is being battered by the headwinds afflicting the rest of the ferrous chain: rising Chinese exports into its traditional end markets, as well as into Turkey itself, it added.
