Turkish mills need to react to pressure: Viewpoint

Turkish hot-rolled coil (HRC) mills will need to adjust offers rapidly to secure tonnage in an increasingly shaky market.

Mills are squeezed between lower-priced Chinese material and anti-dumping duties in Europe, which continue to make their export offers unworkable in the face of cheaper Asian competition. Downstream offers for cold-rolled coil and hot-dip galvanised have slumped from some more reactive re-rollers in Turkey in the last few weeks as a result.

In the aftermath of the February earthquake in south Turkey, the government cancelled the imposition of import duties until 1 April, but that was extended further until 1 May. This has given a lengthy window to buyers to stock up on cheaper Chinese, and other origin, steel. But recently offers from China have fallen more, so when buyers take the import duties into account, prices would still be significantly below domestic material. This week Chinese offers were slashed further, and traders have been short-selling.

Even if the market is debating whether the duty application may be delayed again, in the event that it is, it would mean a differential of more than $150/t between Chinese import prices and Turkish mills. If the import tax is re-introduced from 1 May, at 13-15pc for HRC, it would still mean China has been more competitive than local suppliers, albeit at only $50-70/t on today’s levels.

While Turkish producers have been focusing on the domestic market more than exports for the past year or so, as they could get a better margin there, if they were looking to switch focus, they might need to do so quickly.

Mills have been closely monitoring the EU and US markets over the last few weeks, expecting that price increases in both would open some sales opportunities.

But the EU is this week showing real signals of weakness, with lower-priced import deals concluded from India, Asian suppliers lowering offers, and with local EU producers starting to succumb to pressure from buyers and discount to conclude sales.

The narrative that producers in both Turkey and EU are operating on very long lead times, extending into July deliveries for both, is starting to look weak amid widespread concern that sluggish demand on a weak macroeconomic environment will see a sharp deceleration in prices.

Turkish producers have over the past months tried to position themselves in negotiations closer to EU prices, duties included, compared to other import-origins, under the argument that their lead times are comparable to EU mills. But demand is tepid. The Turkish HRC EU import safeguard quota was a mere 12pc filled in for January-March, and in the first week of April less than 15,000t HRC was custom-cleared.

Turkish producers might need to re-evaluate their strategy and try to secure sales in Europe to protect themselves from potential further drops in prices in export and domestic markets, which might require them to drop comfortably below the $750/t fob mark, and for those with higher anti-dumping duties in Europe, closer to $700/t fob.

By Lora Stoyanova