JAKARTA – A significant shift in the Middle Eastern steel industry has emerged in 2025, as Saudi Arabia’s steel scrap market increasingly diverges from traditional Turkish pricing patterns, prompting the establishment of localized benchmarks to better reflect Kingdom-specific market dynamics.

Historically, Turkey’s steel scrap import market—the world’s largest—has served as a global reference point for pricing trends, including those followed by Saudi Arabian market participants. However, the correlation between these two markets has weakened substantially since August 2025, signaling a fundamental transformation in how the Saudi steel sector operates.

Launch of Saudi-Specific Steel Scrap Index

Responding to strong demand from industry stakeholders for accurate local pricing tools, Fastmarkets introduced the world’s first Saudi Arabia domestic steel scrap index in August 2025. This pioneering benchmark provides a representative reference point for negotiations and contractual agreements within the Kingdom.

The index incorporates pricing data for HMS 1&2 scrap grades delivered to Jeddah, Riyadh, and the Eastern Province. These inputs feed into a proprietary tonnage-weighted calculation model that normalizes for material dimensions and quality specifications.

Steel scrap represents a critical raw material for Saudi mills, used alongside direct reduced iron (DRI) and hot briquetted iron (HBI). While major electric-arc furnaces (EAFs) primarily consume metallics, all steelmaking facilities—including smaller induction furnaces—depend heavily on ferrous scrap.

Divergent Price Trajectories Reveal Market Independence

The contrasting price movements between Saudi Arabia and Turkey during recent months underscore the growing independence of the Kingdom’s market. While Turkish import scrap prices climbed over the past four months due to stronger domestic rebar demand, elevated freight expenses, and tighter material availability from Egyptian purchasing activity, Saudi prices moved in the opposite direction.

Saudi scrap values declined sharply in September and October amid weakening local rebar prices and severely compressed mill margins. However, prices have largely stabilized since then due to constrained supply and recovering rebar valuations.

Statistical Analysis Confirms Weak Correlation

Data from the initial 19 weeks of assessments—spanning August 5 through December 2—revealed a correlation of negative 73.4% between Fastmarkets’ Saudi domestic index and the US-origin CFR Turkey benchmark. This deeply negative relationship indicates that the markets moved in substantially opposite directions.

During the first 14 weeks, the R-squared coefficient measured just 20.6%, demonstrating extremely poor correlation. While this figure improved to 53.9% over the full 19-week period due to November stabilization, the weak link remains evident.

“The low correlation between the Saudi and Turkish markets represents an interesting development that highlights the significance of local market conditions,” noted a Saudi government source last month.

A domestic recycler confirmed the index’s accuracy, stating it provides correct reflection of local pricing realities.

Industry Implications and Market Response

The decoupling carries important implications for index-linked scrap trading contracts in Saudi Arabia. Agreements using CFR Turkey pricing as a baseline during this period would have moved almost inversely to actual Saudi market conditions.

By December 8, while the US-origin CFR Turkey price stood at $367 per tonne, the Saudi domestic composite delivered price was 1,316.89 riyals ($351 per tonne) on December 2. This represented a $16 per tonne discount under the Turkish price—a dramatic reversal from the $37.77 per tonne premium Saudi prices commanded over Turkey on August 5.

“The Saudi steel scrap market price has reached the appropriate level, and further declines seem unlikely at present,” commented a Saudi steelmaker source last week. He suggested the market should realistically trade $40-50 per tonne below CFR Turkey pricing, primarily because HMS 1&2 materials in Saudi Arabia typically match lower 60:40 or 70:30 quality grades compared to the 80:20 specifications imported into Turkey. However, tight supply conditions make such discounts improbable.

Vision 2030 Drives Market Transformation

The shift toward localized pricing aligns with Saudi Arabia’s Vision 2030 development initiative and the Kingdom’s expanding domestic steel sector. Industry participants increasingly prefer local indices over international comparisons as the Saudi market matures.

Steel scrap supply has become progressively more critical given rising steelmaking capacity and growing demand from infrastructure projects. Recognizing low material availability and increasing consumption, the Saudi government is establishing an entity dedicated to importing scrap from overseas markets, commencing operations next year.

Steelmakers—from smaller induction furnaces to major electric-arc furnace operators—have submitted their 2026 scrap requirements to authorities, with one large mill reportedly requesting 200,000 tonnes.

Robust Production Growth Fuels Demand

Saudi mills produced 8.87 million tonnes of steel between January and October 2025, representing a 12.9% year-over-year increase according to World Steel Association data compiled by the Arab Iron and Steel Union.

This growth stems from expanded steelmaking capacity at induction furnace-based companies like Al Qaryan and Watania, the May restart of melting operations at SOLB Steel’s EAF facility, and stronger output from major producers.

The Kingdom’s non-oil private sector businesses experienced robust operating condition improvements in November 2025, with overall activity expanding at the fastest pace in 10 months. This acceleration was driven by higher sales volumes, rapid workforce expansion, and increased purchasing activity, according to Riyad Bank’s purchasing manager’s index (PMI).

The establishment of independent Saudi pricing mechanisms marks a maturation of the Kingdom’s steel industry, reflecting its growing capacity, infrastructure investment, and strategic economic diversification beyond petroleum dependence.

Original Article:

Fast Markets. (2025, December 10). Saudi Arabia-Turkey steel scrap correlation sinks in 2025, highlighting local pricing need. Retrieved from https://www.fastmarkets.com/insights/saudi-arabia-turkey-steel-scrap-correlation-sinks-2025-local-pricing-need/