Turkish scrap import prices were flat on Friday as at least one Iskenderun mill declared force majeure in response to the state of emergency declared in southern Turkey following the deadly earthquake on 6 February.
In an official notice, Bastug Metalurji stated that contracts that have been signed and/or are about to be signed are now subject to force majeure conditions. It said that “our obligations to perform under the contract have been suspended/extended accordingly.”
Other Iskenderun mills have been heard to declare force majeure but no official documentation confirming this was has been seen by Argus.
Steelmakers had to wait for the Presidential Decree of a State of Emergency to be passed through the national assembly to become law and be officially gazetted before declaring force majeure.
Iskenderun mills likely have no choice other than to go down this route primarily because of the inability to load or discharge steel and scrap cargoes at a time when there is little manpower available and support infrastructure at the port of Iskenderun remains disrupted.
After a declaration of force majeure, scrap sellers will tell shipowners that they do not have to pay demurrage costs for vessels that are sailing and unable to be discharged. Because there is a force majeure situation vis-à-vis their customer, they are protected and the discharge conditions have to be extended. Vessel owners will then have to claim insurance for the costs of vessels that have to remain seaborne for longer than the contract conditions.
Some market participants said that there is an obligation for both seller and buyer to try to mitigate the damages but that the likelihood of cargoes being re-directed to other buyers was slim. It is also not in the interest of Iskenderun buyers to re-direct cargoes when most of those cargoes traded at lower prices than today’s market level.
At least 11 deep-sea cargoes are understood to be seaborne and destined for Iskenderun. Five are of European-origin, four are of UK-origin, one is of US-origin and the other is of Baltic-origin.
The declaration of force majeure also means that steel shipments will not be loaded, at least in the short-term, and protects any steel seller from being sued for not performing the contract/shipment. Most steel shipments scheduled will have been traded at lower prices than today’s market price range.
Most market participants in China expect construction steel demand to improve further next week and data released today by the People’s Bank of China provided some solid support. New bank loans in January were more than three times the numbers of December, much higher than expected. New bank loans stood at YN4.9tn ($720bn) in January, indicating how the central bank is looking to stimulate economic recovery after the easing of COVID restrictions.
The Argus daily HMS 1/2 80:20 cfr Turkey steel scrap assessment was flat at $427/t cfr on Friday.
The Argus daily HMS 1/2 80:20 cif Turkey (short-sea) steel scrap assessment was flat at $407.50/t cif on Friday.
By Alex Reynolds
