The ferrous scrap market is encountering a complex set of challenges as it heads into April. While March saw a boost in scrap prices, maintaining this momentum could be difficult due to a combination of seasonal disruptions and political instability, especially in Turkey. The upcoming end of Ramadan, along with Turkey’s political unrest, could dampen trading activity, affecting global steel demand and U.S. scrap exports.
Ramadan and Political Turmoil Impact on U.S. Scrap Exports
Reduced Trading Activity in Major Markets
The end of Ramadan on March 31 is expected to significantly reduce trading activity in key U.S. scrap export markets, particularly in Turkey, Bangladesh, and Pakistan. As these Muslim-majority countries experience a slowdown during the holiday season, ferrous bookings are anticipated to be limited. This reduced demand coincides with ongoing negotiations between U.S. scrap sellers and domestic mill buyers. According to Davis Index, Turkey, one of the largest U.S. steel scrap buyers, is preparing for a drop in scrap demand. The holiday disruption, along with the local market’s typical slowdown, may impact the trading of heavy melting steel (HMS) grades.
Political Turmoil in Turkey
Compounding the situation in Turkey is ongoing political instability that has already affected the local recycled steel market. Mills in Turkey have suspended ferrous scrap purchases due to political tensions, fluctuating currency values, and a slowdown in steel product sales. This uncertainty has led to a significant pause in imports of U.S. scrap. Atilla Widnell, from Navigate Commodities, points out that the Turkish lira’s depreciation has made U.S. scrap more expensive, leading Turkish mills to reconsider their purchasing strategies. In response, these mills may opt for alternative sources, such as Chinese and Malaysian steel billet, instead of purchasing U.S. scrap.
Despite these challenges, Widnell remains optimistic that U.S. ferrous scrap prices won’t collapse. He believes that robust scrap prices in the U.S. will continue to support global markets, maintaining a pricing floor for scrap in the seaborne market.
Alternative Markets and Outlook for April
India’s Growing Demand for U.S. Scrap
With Turkey’s market facing challenges, India is emerging as an alternative market for U.S. exporters. Despite the Ramadan disruption, U.S. exporters are seeing a positive trend in Indian subcontinent scrap prices. Davis Index reports that Indian buyers have been willing to increase their bids by $2 to $4 per ton for HMS and P&S grades in the final week of March. This willingness to pay more for U.S. scrap, along with continued demand in Bangladesh and Pakistan, provides some relief to U.S. exporters.
Stable Pricing Amid Uncertainty
While pricing for HMS and plate and structural (P&S) grades on the U.S. East Coast has remained stable to rising throughout March, the market remains volatile due to these external factors. The disruption in Turkey, especially regarding higher bids not being recorded for Turkish cargoes, has kept scrap values from skyrocketing. However, the U.S. scrap market remains resilient, with better export and domestic market pricing reported, making it likely that U.S. exporters will continue to find opportunities in other global markets.
Conclusion
The global ferrous scrap market faces significant headwinds in April, with Ramadan and political uncertainty in key markets like Turkey creating challenges for U.S. exporters. However, despite these disruptions, alternative markets in India, Bangladesh, and Pakistan offer opportunities for U.S. exporters. As global demand remains steady, particularly in countries like India, U.S. scrap prices will likely continue to hold strong in the coming months.
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