Strong demand on the horizon

Görkem Bolaca of LN Metals talks with SteelOrbis Istanbul about how market conditions are affecting his company, and why he believes 2011 will be a stronger year for steel demand than 2010.

Görkem Bolaca is the Sales Manager at UK-based LN Metals, an international trading company serving customers in South America, Europe, CIS, Africa and the Middle East through its London headquarters and branch offices in China (Beijing and Hong Kong), Brazil (Sao Paolo) and Belgium (Brussels). LN Metals deals primarily with flat and long steel products, plus non-ferrous and minor metals.

What is the difference between LN Metals and other trading companies on a structural basis?

GB: First Rand Bank (the second largest bank in South Africa) owns 46 percent of LN Metals, and 25 percent of the shares belong to Louis Dreyfus, which is one of the most prominent traders in soft commodities. Competition with other trading companies is especially strong at this time, so what makes us different, to both the producers and customers we work with, is having the backing of an important financial power.

In which sectors are you working primarily?

GB: Our primary business is with iron and steel products and minor and precious metals such as cobalt, zinc, aluminium and copper. My responsibility is the iron and steel department, and we have a very wide range of customers: from supplying raw materials to flat steel producers, to the producers of sandwich panel that buy the flats. Sure, some difficulties occur when you work with such a wide range of customers, but we are very sensitive in only working with the producers that have abilities to answer to our customers’ needs, which differ greatly regarding materials, financial situations and products types.

What are your current target markets, and how do you search for new markets in general?

GB: Normally, firms give figures when they talk about the target markets and market share. In fact, keeping the market share and increasing it is more important than mentioning the market share for any period of time. We have been in the European and South American markets primarily, and we have seen sales stability especially in the Middle East. We search for new markets in areas with relatively low GDP per capita and high populations. In this context, Middle Eastern and African countries can be considered as our target markets as they have not reached financial satisfaction and infrastructure projects are still emerging in these areas.

Also, as First Rand Bank has South Africa origins, we are working with mines in Africa exclusively. We would like to use this experience not only in minor metals but with iron and steel as well.

Describe your operations in the futures market.

GB: In LME, we are actively operating futures contracts with our customers in non-ferrous metals such as cobalt, zinc, aluminium and copper. As you already know, steel billet contracts are relatively new in futures, but we think they will gain an important place in the futures exchange in time. In order to acheive this, the storehouses in Turkey are very important.

What is your general view about 2011? What are your expectations regarding the future?

GB: In short, I believe this year will be better than 2010. I do not completely agree with those who say “demand is not strong.” Iron and steel demand in some countries (which we should observe very carefully) is really strong. For example, local demand in China and Russia is increasing, which is evident in export prices given by their local producers.

In Europe, we have observed that producers have not been met with resistence from their customers regarding price levels. In India as well, comparison of first quarter HRC demand shows us there is an expectation of a 2.5 million mt increase. Therefore, not only do I believe that we will see better demand levels this year, but I think that we will experience a situation in market conditions that will show favor to the demand side as supply increases with investments all over the world.

Additionally, new markets will be important, adding value to customers will be vital, and we are getting into a period in which the producers will adopt “the customer basis” point of view.

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