Turkish flats sector struggles with economic negativity

Friday, 20 June 2008 18:05:30 (GMT+3)   |  
       

Although the Turkish domestic flats market has recently raised its price levels with the latest price hikes made by the Russian, Ukrainian and Bulgarian mills, it is impossible to say that the demand side is showing a similar positive trend. Although the companies which are continuing their manufacturing activity without halt are seen to be active in purchases having heard that prices will rise further in the domestic market, it is seen that, in general, the booking level is very low. In particular, while the market seemed to rebound in last week, it is showing extreme quietness this week again and there is a great bottleneck in the market due to the cash shortage. In recent days - when both cash shortages and political uncertainties are adversely affecting companies in economic terms - the most significant problem is that prices are not signaling any sign of a softening in the short term despite all these negative factors.

The increase in the country's energy and raw material costs is not being reflected in the prices for end products. Given the current weak purchasing power against the background of inflation, the market is displaying great stagnancy. All these factors are affecting and will continue to affect the market in a negative way. However, unfortunately the sluggish demand is not providing any room for prices to drop. In particular, developments in the foreign markets and the price rises in these markets are being reflected in Turkey in a parallel way. Although those market players who used to think that prices would decline and so delayed their bookings, have finally understood their mistake but cannot rectify their error. All in all, the market has been caught on the wrong foot as regards the price increases.

The major fact in the current situation is that steel, oil and raw material prices are rising globally and all developing countries like Turkey are trying to take measures to fight against inflation. With China imposing a tax on exports, and Saudi Arabia banning scrap and rebar exports, it is observed that developing countries are making efforts to reduce inflation in their domestic markets.

As regards the Turkish domestic flats market, it is seen that Erdemir production 2 mm thickness HRC is being sold in the local market at $1,230-1,250 + VAT, 2.5-12 mm thickness HRC is at $1,220/mt + VAT, and 0.9-2 mm CRC at $1,300-1,330/mt + VAT. And during this period, when cash shortages are in evidence, the companies that are having cash problems are only able to conclude sales at very low levels for small tonnages. As regards import materials, the larger importers in Turkey's Gebze region are selling 2 mm thickness HRC at $1,220-1,230/mt + VAT, 2.5-112 mm thickness HRC (narrow) at $1,210-1,220/mt + VAT, 2.5-12 mm thickness HRC (wide) at $1,230-1,250/mt + VAT and 0.7-2 mm thickness CRC at $1,300-1,310/mt + VAT.

One of the most important issues in the domestic market is the shortage seen in the HRP supply for the past four to five months and the resulting high HRP price levels. Ukrainian origin HRP of 50 mm and above thicknesses are sold in the Turkish domestic market at the level of $1,400/mt + VAT, Romanian origin HRP of 50 mm thickness are sold at $1,450/mt + VAT, Erdemir production HRP of 50 mm thickness and above are sold at $1,480/mt + VAT, all being minimum levels.

As regards the upcoming period, with the approaching summer season followed closely after by Ramadan, it can be expected that the market will remain stagnant. However, the answer to the question "Can this sluggishness bring a certain softening in terms of prices?" entirely depends on the market developments. Nevertheless, with no downtrend expected in the short term, it is even likely that an uptrend may be experienced.


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