Turkey is a sizeable importer of scrap metal to feed its steel production industry – scrap imports rose 15.8% in the first six months of 2018 to 10.77 million metric tons. Recent tariffs from the USA imposed on Turkish steel imports has led to a near-collapse of the Turkish lira, and there are fears that imports will plummet.
As a result, scrap metal import prices into Turkey have fallen sharply as sales into Turkish steelworks fall away. However, there is some light at the end of the tunnel as Indian steel-makers take advantage, and slowly, but surely, confidence returns to the Turkish steel market.
With an unpredictable US Administration and the potential for increased trade battles between countries, there are volatility risks to the price of scrap metal. Some metals are traded on the London Metals Exchange which can give rise to scrap price volatility from trading in commodity investments. Currency fluctuations can also play a part in export pricing and have clearly done so considering a fall in the value of sterling.
Scrap metal processors inevitably try to pass on to suppliers the full amount of each drop in prices and have done so in recent months.
How can UK businesses ensure that they aren’t at risk from these events?
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At ERA, we are often struck by how unbalanced the relationship can be in favour of scrap merchants that buy from scrap metal producing companies. We help our clients to take control of that relationship.
When prices start to rise again, some merchants may try to hold on to a chunk of any growth to increase their margins. The clear majority can get away with this as most contracts are not tied into market movements.
Protecting your business from variable rebates, costs and unfair deals is easy if you know how. Following our engagement, our clients realise that improving procedures is not as difficult as they initially thought.
Understanding the market is crucial. Market movements present opportunities for some scrap merchants to drop the amount they were paying businesses for their waste. Whereas some of these variations may be reasonable, some won’t be. It is important to introduce controls, otherwise many businesses will unknowingly be receiving poor value from their scrap merchant.