Turkish HRC producers focus on exports as EU quotas rise, home demand slows

Offer prices by Turkish mills for hot-rolled coil have remained relatively stable in recent days, as domestic demand has slowed and buyers focus on lower-priced import options, after HRC climbed by $400/mt in a month in the wake of Russia’s invasion of Ukraine.

Turkish mills have instead focused on the export markets, as the increase in EU quotas is expected to support Turkish mills’ export volumes and prices in the coming weeks, sources told S&P Global Commodity Insights March 22.

The European Commission decided to allocate Russia’s quota to other countries on March 15 after it banned Russian steel imports. As a result, Turkey’s quota for hot-rolled sheets and strips rose to 430,246 mt for the second quarter of 2022 from 323,200 mt in the first quarter.

The sharp rise in HRC prices at Turkish mills, however, spurred notable buying interest in Chinese-origin HRC in Turkey. Turkish buyers booked around 400,000 mt of HRC from China in the last three weeks at competitive prices as low as $980-$1,010/mt FOB, sources said.

“Turkish mills’ HRC offer prices, which rose to $1,300 mt EXW as of the previous week, aren’t yet accepted by the domestic market, as lower imported offers are available,” a manager at a major Turkish pipe producer told S&P Global March 22.

“We also heard that Turkish mills’ HRC offers at around 1,300/mt FOB haven’t yet been accepted by European buyers, as Indian- and Japanese-origin HRC offers are competitive,” he said.

However, he said he is expecting these levels to be accepted in the coming weeks as some availability issues could emerge.

A manager at a Turkish HRC producer said EU buyers who booked some cargoes in previous weeks have refrained from booking new position cargoes in recent days.

A level of $1,250/mt FOB has already been accepted by EU buyers amid an antidumping duty on Turkish HRC, he said, while $1,300/mt FOB has also been accepted in some markets outside the EU.” Indian, Japanese, Koeran, Taiwanese and Egyptian producers are effectively in the EU market, while Chinese mills are actively selling to Turkish and Egyptian markets, he said.

Highlighting that traders had begun to face problems getting letters of guarantee from banks, a service center manager told S&P Global March 22 that trade activities have remained very slow in recent days.

“I don’t think that HRC prices over $1,250/mt could be easily accepted by the domestic market,” he said.

— Cenk Can