Metals Update – Feb 17 2023

Turkish Earthquake impact on Turkish Steel exports

Due to the recent Earthquake in Turkey and Syria, reports suggest that supply disruption of Steel Rebar and Scrap could potentially cause problems in the global supply chain to vital consuming sectors, namely construction. It is important to note that Turkey is the largest exporter of Steel Rebar, vital for the construction sector.

Turkish imports of Steel scrap and shred will be impacted by the closure of the country’s Iskenderun ports. Mills in the Steel making hub are expected to declare a force majeure after the incident, causing heightened uncertainty for its production prospects in the coming weeks and months, further exacerbated by the disruption to natural gas supplies and energy infrastructure.

LME Steel Rebar is currently breaking out of its rangebound lows from October – January, having risen 6.6% since the start of the year and 16% since October 2022.

Trafigura Nickel Controversy Intensifies

Trafigura has filed a lawsuit against companies associated with Sanjeev Gupta in London’s High Court, claiming that some of the containers bought from them did not contain the promised nickel but instead with less valuable material, such as carbon steel and nickel alloys. Trafigura has only examined about 15% of the containers to date, but if the alleged fraud is widespread, it could affect almost 25,000 tonnes of nickel, equivalent to about 10% of the company’s nickel trading book.

Although this amount is small compared to the global production of nickel, it is significant, as it is more than half of the nickel currently held in London Metal Exchange-registered warehouses and forms part of Trafigura’s battery metals portfolio.

The companies connected to Gupta, including UD Trading and TMT Metals, have been trading with Trafigura for years without issue. However, Trafigura became suspicious last year when it identified red flags in its screening processes, including extended shipment periods and delays in providing documents. It was not until the fourth quarter of 2022 that the company uncovered the alleged fraud, which it claims could cost it up to $577 million. Although this would be a painful blow, Trafigura’s profit in 2022 exceeded $7 billion, and it still expects its earnings for the first half of 2023 to exceed those of the previous year. Fortunately, there were pre-sales of the material, no banks were exposed to the financing, and Trafigura had no hedging exposure, according to market participants.


Calendar of Events

Feb 17, 2023

  • German PPI MoM (JAN)
  • UK Retail Sales YoY (JAN)


Feb 21, 2023

  • UK S&P Global/CIPS Manufacturing PMI Flash (FEB)

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