Turkiye's scrap imports drop 7% q-o-q in Q1CY'25 on price volatility, weak rebar margins

• Scrap prices surge in Q1 amid tight supply
  
  
• Rebar tags fail to match increase in scrap prices
  
  
• TRY depreciates amid inflation, political turmoil
  
  

• The Netherlands was the leading scrap exporter to Turkiye in Q1CY'25. Shipments increased by 14% q-o-q to 0.84 million tonnes (mnt).
  
  
• The US was a close second with 0.78 mnt, a 30% drop from 1.12 mnt in Q4CY'24.
  
  
• Additionally, shipments from the UK declined by 25% q-o-q to 0.46 mnt. Meanwhile, Belgium recorded an 8% increase to 0.41 mnt.
  
  

Steep price hikes keep buyers wary: Turkish imported scrap prices witnessed a steady uptrend in Q1CY'25. Although prices were stable q-o-q at $358/tonne (t), a w-o-w examination reveals an overall downtrend in Q4CY'24, barring some fluctuations, while in Q1CY'25, tags witnessed a steady climb. This price rise led to cautious buying by Turkish mills, given that rebar demand was subdued.Prices of US-origin HMS 80:20 averaged $341/tonne (t) CFR Turkiye in January, with the middle of the month witnessing a plunge to $335/t, nearly a three-year low.

However, the monthly average price then shot up by $16/t to $357/t in February amid weather-related supply constraints and increased collection costs.Prices continued their uptrend in March, averaging $377/t, on the back of the supply squeeze.Trump's announcement of 25% tariffs on US steel imports also pushed US scrap suppliers to maintain firm offers.In comparison, during Q4CY'24, US-origin HMS 80:20 averaged $376/t in October, declining subsequently to $354/t in November and $345/t in December.

EU-origin scrap prices reflected a similar upward trajectory in Q1CY'25 amid slow collection due to the harsh winter. Monthly average prices of HMS 80:20 bulk, FOB Rotterdam, stood at $316/t in January, $332/t in February, and $350/t in March. Earlier, in Q4CY'25, prices were at $344/t in October, $326/t in November, and $319/t in December.

Rebar prices weaken, pressuringmillmargins:Amid subdued construction demand during the winter, mills experienced poor rebar sales. As a result, prices softened, pressuring mill margins.Despite firm scrap prices q-o-q, quarterly average rebar prices fell by $27/t to $565/t FOB Iskenderun in Q1CY'25 as compared to $592/t in Q4CY24.This implies that the rebar-to-scrap spread narrowed by around $17/t to $207/t in Q1CY'25 compared to $234/t in Q4CY'24.On a monthly basis, rebars averaged $615/t in October, $588/t in November, and $574/t in December.

In contrast, in Q1CY'25, monthly average rebar prices showed a range-bound trend, with $561/t in January, $563/t in February, and $572/t in March. Thus, the rebar-scrap spread plunged from a high of $239/t in October to a low of $195/t in March.

TRY depreciation makes imports costlier:The Turkish lira suffered a steep fall against the US dollar, averaging around 34.6 in Q4CY'24 and 36.4 in Q1CY'25. Specifically, in October, the lira was at 34.3, which steadily dropped to 35.5 in January and then 37.1 in March.The lira has been gradually declining due to a range of factors, including high inflation, a persistent current account deficit, and prevailing fiscal policies. The sharper devaluation in Q1 could be attributed to widespread political unrest, triggered by the arrest of Istanbul mayor Ekrem Imamoglu, a rival of President Erdogan.

Higher domestic scrap generation dents import demand: Domestic scrap generation surged by 43% to 2.98 mnt in Q1CY'25 compared to 2.08 mnt in Q4CY'24. Greater usage of domestic scrap in steelmaking likely reduced demand for imports.

The rise in scrap generation could be attributed to clean-up activities following the 2023 earthquake, which caused widespread destruction in central and southern Turkiye.However, it is worth noting that in 2024, imports also rose in tandem with domestic scrap generation. Additionally, a certain share of the scrap generated could also have been used in the foundry industry, which has a thriving presence in Turkiye.

Finished steel imports edge up: Finished steel imports increased by a marginal 3% to 2.04 mnt in Q1CY'25 compared to 1.98 mnt in Q4CY'24.

Higher availability of finished goods naturally negated the need for steelmaking raw materials such as scrap and pig iron. To illustrate, pig iron imports fell 18% q-o-q to 0.4 mnt in Q1CY'25.