Wider macroeconomic uncertainty appeared to seep into Turkey's market for imported steel scrap Monday.
Late Friday, Moody's Investors Service downgraded the country's rating outlook from stable to negative, citing the erosion of institutional strength, its weaker growth outlook, intensified pressure on the public and external account and the consequent heightened risk of a credit shock.
The terse political environment following the failed coup last July had lasted longer than anticipated, and was being exacerbated by the April 16 referendum on constitutional reform, Moody's said.
Faced with a weaker currency and soaring inflation, the country focused on bolstering short-term economic activity via increased credit, which "increased moral hazard," it said; lower capital inflow amid domestic and external political/economic risk meant the country was burning through its foreign exchange reserves rapidly at a time of magnified currency weakness.
This precarious economic position seemed to dent sentiment in the scrap import market, after an ex-Holland sale reported last Friday had already roiled participants.
One Turkey-based agent for Baltic sellers said he expected heavy melting scrap I/II (80:20) to trade at $275/mt CFR based on debar prices -- some producers reduced domestic bar prices by $20/mt or over Monday on the back of the recent lira appreciation, as well as weaker scrap costs.
There was talk of a Marmara-based steelmaker booking Belgian HMS I/II (75:25) at $272/mt CFR, which would normalize to around $280/mt or lower against S&P Global Platts methodology, but this could not be confirmed by the wider market or reported counterparties.
A Benelux-based seller said $285/mt CFR was still the market level for EU-HMS I/II 80:20 after Friday's ex-Holland business at this level.
A European trader said value for premium 80:20 lay at $290/mt CFR, while a more bearish stateside trader said $284/mt CFR was tradeable and that the market could turn "brutally negative."
"The Chinese government trying to get people to understand what is happening is a landmark thing, that makes me a little concerned," he said, referring to CISA and the government coming out several times recently to say steel prices would not climb.
"The CIS, Turkey, India and China are looking to come back into the export market," he added.
However, he did not believe it would be a "clear linear downtrend," as Beijing would "step in and try to control coal and some of the other inputs to prevent people stopping out quickly."
On scrap supply was not overflowing, and this situation had been exacerbated by recent weather on the US East Coast, he added.
The market was shrouded in opacity to some extent Monday, as people tried to digest the lower sale reported Friday.
