The answer to this question is the most significant issue for the Turkish iron and steel industry. As most analysts state, one of the best ways to overcome the global crisis would be for the Far East, and China in particular, to spend the foreign exchange they have been accumulating over many years as a result of their foreign trade surpluses. Arguments have even been heard that they should also go as far as incurring trade deficits so that a balance between East and the West is secured.
Our main focus is steel, so let's see how the above scenario would impact the industry in which we are interested. If the money is to be spent, then the West will have to sell goods to the East. The West does not have many products which the East cannot produce itself. Fifteen years ago, the situation was different; however, today all Western products can be produced in the East. As a result, the only thing the West can offer to the East is raw materials.
Ferroalloys, scrap, ore, coal and so on. And right now these are the only materials the East is buying. I do not personally believe that they will turn these raw materials into products and export them. I am basing my case on two factors:
First of all, in such an event, the western economies would collapse and the world economy cannot allow this to happen. Secondly, investments in the Far East are made not considering exports but considering requirements in their own markets. Only Japan can be considered an exception. Thus, it is highly possible that the East will exert an enhancing effect on raw material prices, as they already have funds to spend on raw materials.
How will Turkey be impacted by such a situation? If we focus on scrap, we see that the priority source for the Far East is Japan and the US. They do not need European scrap in terms of quantity. Consequently, we can say that Europe and the US have separated in terms of raw materials. However, if the scrap producers reflect the Far East's price movements in Turkey and its neighboring region, the situation might get worse. This is because Turkey is producing steel in excess of the levels required in the region, and so it also needs to export to the Far East.
In short, if Turkey and Europe can detach themselves from the Far East in terms of raw materials and can integrate themselves with the Far East in terms of product sales, the crisis will be overcome. Otherwise, Turkish producers will be seriously affected. When Turkey is badly hit, European scrap suppliers will also be hit as Turkey is still their biggest buyer.
Extraordinary decisions should be made in extraordinary situations. If European scrap suppliers and Turkish producers do not discuss the matter and find a solution, even if temporary, the system that has been developed and improved over the years will be irreparably damaged.