Turkish long steel market subdued amid big currency, shares decline

The Turkish long steel market started the week subdued as Turkish lira and stock markets lost more than 10% value on March 22, following the dismissal of Central Bank governor with a presidential decree on March 20.

The Central Bank raised interest rates by 200 basis points to 19% on March 18, 100 basis points higher than market expectations, as Platts has reported.

This decision drew a reaction from Turkish President Recep Tayyip Erdogan, who objects to interest rate hikes. He dismissed the bank’s governor, Naci Agbal, and appointed Sahap Kavcioglu, a professor and former parliamentarian of Erdogan’s ruling AK party, as the new governor with the weekend decree.

Kavcioglu became the fourth central bank governor in the last five years. These changes are harming market stability expectations and causing sharp currency fluctuations, sources said.

Turkish lira was trading in a wide range of Lira 7.85-7.95/1 on March 22 afternoon, compared to 7.28-7.32 range seen on Friday, March 19.

The Turkish long steel market started the week silent in this sentiment, as market participants generally preferred to monitor the currency fluctuations before making new purchases.

The depreciation in Turkish lira is expected to pull up lira-denominated domestic rebar list prices notably in Turkey in the coming days, which could restrict end-users demand, although mills’ list prices declined on a dollar basis on March 22, amid lower scrap costs and slow demand.

Major Turkish long steel producer Icdas pulled up its lira-denominated domestic rebar list prices by a notable Lira 280/mt in this sentiment. The company started offering 12-32 mm rebar at Lira 5,790/mt ex-works Biga on March 22, including 18% value-added tax (VAT), which equated to $621/mt ex-works, excluding VAT, around $20/mt lower on a dollar basis week on week. The exchange rate was Lira 7.90/$1.

Icdas’ offer prices for 12-32 mm rebar in the Istanbul region were around $10/mt higher at Lira 5,870/mt ($630/mt) ex-works.

The company’s 10 mm rebar list price was at Lira 5,910/mt ex-works and the 8 mm rebar price was at Lira 5,950/mt ex-works in the Istanbul region, including VAT March 22.

Bastug Metalurji, based in Osmaniye, southern Turkey, also opened its lira-denominated domestic rebar order book March 22. But instead of announcing its lira-based list prices, the company said their 12-32 mm domestic rebar list price will be calculated from the daily currency exchange rate, equating to $620/mt ex-works plus 8% value-added tax (VAT), the company informed Platts.

The company’s new list price was also reflecting a roughly $20/mt week on-week decline on lower scrap prices and slow demand.

Other Turkish steel producers could also join this move in the coming days, taking into account the currency fluctuations, demand conditions and scrap pricing, sources said.

— Cenk Can