Russian and Ukrainian exporters are among those few who are negotiating new contracts with Turkish steelmakers this week. While the key European and US suppliers of scrap prefer waiting until the lull in the Turkish market is over focusing on the domestic market, where the buyers are bidding at competitive levels amid seasonal shortage of supply, CIS scrap collectors are making every effort to export their material. In spite of firm demand in Russia and Ukraine, purchase prices are still below the level of export quotations there. However, realizing that the suppliers are ready to reduce prices to sell February offering of scrap, Turkish mills have put too much pressure on exporters, dropping bids to the levels minimally profitable for scrap collectors, thus making the latter suspend sales.
In particular, as quotations to Turkey and purchase prices at ports are moving in opposite directions, exporters of Rostov-on-Don can offer their A3 scrap at $490-495/t C&F ($460-465/t FOB, excluding freight rates of about $31/t). However, while in the second week of January a number of Turkish mills were ready to accept these levels, currently they bid $480-485/t C&F ($450-455/t FOB) at the highest to Azov-Black Sea exporters, which can barely cover the suppliers' expenses.
Prices for scrap are going up at ports, while the exporters in need of attracting additional material to fulfill previously signed contracts compete with the local mills for the available material. At the moment, export quotations of A3 scrap have reached $347/t CPT cash payment and $354/t CPT non-cash payment, $10-15/t up w-o-w.
Prices are also steadily growing at the Ukrainian ports. Offers of A3 scrap have added about $30/t from early January, reaching $364-370/t CPT now.
Ukrainian traders can afford raising them by another $10-15/t, in spite of rapidly decreasing profitability. Although they will hardly reach the $500/t C&F Turkey level this month, some companies, who closed sales at $495/t C&F ($465/t FOB) at the end of the first half of January, are already close to it. Currently, traders are ready to sign contracts even at $485-490/t C&F ($460/t FOB).
Most Russian exporters of the Baltic Sea, who set their prices mainly based on quotations from Europe and the USA, still regret missing an opportunity to sell their A3 scrap at $520-525/t C&F in the beginning of the month, when most of them were out of the market for holidays. Market operators report only one company from St.-Petersburg has managed to sell a batch of high-quality material from its European scrap yard at $525/t C&F. This may be considered a success in view of the fact that several days later another exporter put much effort to sign a contract at $495/t C&F, which is a more appropriate price for the current market conditions. Currently, export prices in St.-Petersburg are at $435-440/t FOB, against $450-455/t FOB in early January, due to an increase in freight rates in January from $55/t to $65/t on the back of growing cost of fuel and lubricants.
Suppliers will not quote their material below this level, as purchase prices for scrap in ports have risen to $344-351/t CPT, against $332-342/t CPT last week.
In spite of a drop in quotations, most exporters expect Turkish mills to bid higher soon, as US and European traders will hardly reduce their offers and the necessity to attract material to sustain production in February will force the steelmakers to sign contracts at the level of $500/t C&F and above.
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