What does 2017 hold in store for Turkish steelmakers?

This year has started much like the last finished for Turkish steelmakers. Rebar export demand remains tepid and the staggeringly weak lira has inflated domestic prices at the expense of business.

Economic and political concerns continue to weigh heavy. President Erdogan’s post-coup crackdown and bid to implement constitutional reform has investors spooked, and falling exports — despite prolonged currency weakness with the lira tanking since last July — mean the current account deficit is widening considerably.

Longs mills are foraging for new markets as the impending imposition of duties in the US could curb demand from a key importer — although the 2.44% margin proposed earlier this month for some mills by the Department of Commerce was below the 3.64% proposed in April last year and is probably workable for mills.

But if President Trump’s protectionist rhetoric becomes policy, Turkey could suffer a further contraction in American demand. Other regions, such as Egypt, are also looking to reduce Turkish import penetration through trade cases.

At the same time further rebar capacity has been brought online in the Middle East and North Africa region, crimping import demand when oil-dependent nations have seen gross domestic product hit by low oil prices.

There are still some export opportunities, however. Late last year Turkish steel mills took advantage of an arbitrage into Southeast Asia as the precipitous rise in coking coal costs meant electric arc furnace-based production was considerably cheaper than blast furnace-metal. Recently there have again been offers of Turkish bar into Hong Kong and elsewhere, despite BF production being more competitive.

Mills in the country producing flats may be in something of a sweet-spot as trade measures by the European Union keep out material from China, Russia and other prolific exporters; Turkey was originally named in an EU case on HRC, but was later removed. Nevertheless, sources suggest it needs to watch its import volumes into the EU28, as it could subject itself to an investigation.

Recently Turkey has been competitive price-wise in Europe on hot rolled, aided by the weak lira and galloping domestic prices within the continent — some tier 1 service centers and OEMs have signed annual contracts at prices Eur240/mt up on year , after initially pushing back on offers of Eur200/mt. Lead-times of a few months are currently similar to domestic European producers.

Some mills — notably Erdemir — are looking to build out coil capacity, with galvanized seen as a major opportunity given the country’s buoyant automotive demand.

Read Colin's recent blog post: Will the steel market bears bite back in 2017?