With the Turkish steel industry facing accelerating production cuts in the last three months, amid low demand and higher energy costs, there were risks for more serious disruptions to output in the coming months, Turkish Steel Exporters’ Union Vice President and Colakoglu CEO Ugur Dalbeler told S&P Global Commodity Insights Sept. 14.
“The constriction in Turkish steel production reached 13% on the year in June and 21% in July amid output cuts,” he said, adding that a main reason for the decline was lower EU steel demand, which was traditionally one of Turkey’s top export markets.
“Exports to the EU nearly came to a standstill in the last three months,” Dalbeler said.
Flat steel exports to the EU region fell 20% year on year in the three-month period, while bar exports declined 18%, he said, adding that the decline in export volumes continued in August.
Falling industrial output in Turkey had also impacted steel demand, Dalbeler said.
According to the latest Turkish Statistical Institute (TUIK) data, industrial production in Turkey fell 6.2% month on month in July.
“These unfavorable market conditions have been pulling down Turkish steel mills’ capacity utilization rates and have been causing temporary stoppages,” Dalbeler said.
The share of energy in steel production costs was up more than fivefold year on year due to rising energy prices, which was harming mills’ competitiveness, he said.
Mills’ input costs had also jumped due to a 50% increase in electricity and natural gas prices for industrial use announced Aug. 31.
Another risk was the Ukraine war, with Turkey importing around 7 million mt/year of raw materials from the CIS region before the war and alternative sources being further away and more costly, Dalbeler said.
Turkey’s scrap imports from Russia, traditionally one of its top suppliers, slumped 62% year on year to 408,000 mt in January-June, while imports from Ukraine totaled 358,000 mt, up from 190,000 mt a year ago, according to TUIK data.
Platts, part of S&P Global, assessed Turkish imports of premium heavy melting scrap 1/2 (80:20) at $349.50/mt CFR Sept. 13, down $2/mt on the day.
Highlighting Canada’s circumvention investigation opened against steel bars imports, which were produced using Russian billet, Dalbeler said said similar investigations could become widespread in the coming months.
European producers’ continuing efforts for new protection measures targeting Turkey were also a risk to steel production, he said, as steel output will continue to decline in these circumstances and could result in the suspension of new investments.
“If the uncertainties will continue for the coming period, exports could fall further and the steel sector may come to a stopping point and disemployments could start as of year end,” Dalbeler said.
— Cenk Can