During the "New Horizons in Global Steel Markets" 12th Annual Conference organized by SteelOrbis in Istanbul on November 2, Basak Turgut, marketing and sales coordinator at Turkey-based Oyak Mining and Metallurgy Group, stated that it is not so easy to predict the future based on past experiences, especially the future of the steel industry which has been impacted by many government policies.
Mrs. Turgut stated that the world economy is in the process of recovery after a period of very slow growth and stagnation following the 2008 crisis. The current level of global purchasing managers' indexes was last seen in 2011 and manufacturing industry production indexes are at their highest level of recent years. She went on to say that the revival experienced in the steel sector this year is not a coincidence, but has a solid basis, adding that in particular manufacturing industry output has been very strong this year and that the growth seen this year had not been seen for many years. Turkey has been most affected by economic indicators in the EU, she stated. The acceleration seen in Turkey's exports of both flat and long steel products has now started to decline due to increasing domestic demand. The Oyak official also remarked that 2017 has been a positive year for both producers and consumers.
As regards producers, Mrs. Turgut pointed out that the most remarkable indicator is the increase seen in the global trade volume, adding that freight rates have risen with the effect of this increase. The Baltic dry cargo freight index has risen to the highest level recorded in the last three-and-a-half years, while the Brent oil price has increased to $60 per barrel. Regionalism has started to increase in trade, she said. adding that China's exports have started to decline and in regions such as Asia, the EU and NAFTA, exports have mostly remained within the separate regions.
Meanwhile, she said that there have been significant changes in China: for example, the producer price index in China, which rose to above zero for the first time in the previous year, has showed significant increases this year and steel consumption has strengthened with support from infrastructure investments. Pointing out that the infrastructure investments in China are planned to continue up to 2020, Mrs. Turgut stated that China has shifted to growth based on investment from growth based on construction. Regarding China’s closure of 65 million mt of induction furnace capacity, she said that this decrease in production has also impacted exports. China's export volume, which was 85 million mt in the first nine months of 2016, has totaled 60 million mt in the January-September period this year, and China's export volume is not expected to exceed 50-60 million mt per year from now on. In addition, China, which plans to eliminate 150 million mt of its steel production capacity up to 2020, is planning that its 10 major steelmakers formed through mergers will comprise 60 percent of the country’s total steel production.
Concerning the production cuts in China, Mrs. Turgut stated that they have impacted the availability of finished steel products and this has had a positive impact on finished steel prices, while having a negative impact on raw material prices. Meanwhile, steel futures prices have also started to affect the spot market. In conclusion, Mrs. Turgut said that investors are excited about the production cuts planned for the period between November 2017 and March 2018 in China, and that this situation has already increased the number of hot rolled sheet futures contracts.