London — A strengthening of prices of Turkish imports of ferrous scrap has led to rebar and billet steel prices losing ground, with scrap increasing in relative strength last week, according to analysis by S&P Global Platts.
Current regional long steel trends have been developing since the end of August, when scrap surged by 8% over a few days. Relative price strength indicators for the commodities had drawn close to their 30-day average expected trading values, and then scrap prices saw a spurt and left rebar and billet behind.
This marked a turn of fortunes after a run of Black Sea billet price strength in July and August. Billet to scrap outright price spreads have contracted sharply since mid-August, when the Platts Turkey ARC 30-day indexes reached their widest dispersion.
A steep decline in the pricing ratio for scrap against iron ore since July may be aiding margins at electric arc furnace mills.
The scrap to iron ore price factor may be reducing the earlier compelling attractiveness of pig iron from regional blast furnaces compared with scrap. Billet and slab typically are offered from regional iron ore consuming integrated steel mills.
The spread between Turkish rebar and Black Sea billet imports remains narrow, limiting re-rolling margins. The spread between Turkish rebar and scrap has plunged below $200/mt since August 31, and hit a low of $190.50/mt last week as scrap prices climbed.
Scrap RSI
Scrap's relative strength over rebar and billet has risen steadily since August 31, Platts Turkey ARC product and composite indexes showed.
Platts Turkey ARC Scrap 30-day relative strength index was 2.18% on Friday, using 30-day data with rebar and billet prices. This was up from a RSI of 1.46% over its expected value a week earlier.
In August, Turkey ARC scrap on a 30-day RSI basis averaged minus 1.94%, or 1.94% below its expected value.
The Turkey ARC Rebar 30-day index was minus 0.92% on Friday. The metric averaged minus 0.28%, or rebar pricing averaged 0.28% below the expected value with the group in August.
The Turkey ARC Billet 30-day index shifted to minus 1.13% on Friday, recovering from minus 1.78% a week earlier.
In August, the Turkey ARC Billet 30-day index averaged 2.15% above expected value, signaling the extent of the volatile price swing in the market between scrap and the now weaker billet.
The data show scrap's relative pricing is currently the strongest of the three commodities.
Scrap's 30-day RSI hit a peak of 2.32% over expected value on September 12, coming back from a low of minus 3.73% on August 17.
The Turkey ARC Industry Composite's collective price index was 84.49 points on Friday, compared with August's average of 85.13 points.
So far this year, March's high of 96.66 points marked the strongest collective monthly pricing for the group since March 2013.
The composite is the sum of Platts Turkey rebar, billet adjusted CFR and Platts TSI Turkey HMS I/II 80:20 scrap CFR pricing, with July 6, 2012, indexed at 100 points.
