The Turkish stainless steel sector has been feeling the effects of the current crisis just like other sectors. Significant output decreases implemented by stainless steel producers around the world have prevented prices from decreasing more than they have. However, stainless steel demand is observed to have declined considerably. As for the reasons behind this decline, a look at the industrial data may be instructive.
Capacity utilization rates in the Turkish automotive industry in January and February this year based on data from Turkey's Automotive Industry Association (OSD) are as follows:
Capacity utilization rate January (%) | Capacity utilization rate February (%) | |
Light Vehicle | 37 | 34 |
Truck | 9 | 7 |
Bus | 72 | 77 |
Midibus | 5 | 10 |
Tractor | 35 | 30 |
TOTAL | 35 | 33 |
In February, the manufacturing industry sectors with the lowest capacity utilization rates are office equipment, information technologies and machinery manufacturing with 41.1 percent capacity utilization. Other sectors, i.e. furniture manufacturing at 59.2 percent capacity and metal goods industry at 61.0 percent (excluding machinery equipment manufacturing) can also help us to understand the decrease seen in steel consumption.
As for the capacity utilization rates in February of sectors which use stainless steel intensively, food and beverage manufacturing stands at 66.3 percent, textile products manufacturing is at 66.5 percent, chemical materials manufacturing is at 68.9 percent, main metal industry manufacturing stands at 71.6 percent, machinery and equipment manufacturing not classified elsewhere is at 67.0 percent, electrical machinery and appliance manufacturing not classified elsewhere is at 67.8 percent, radio-TV communication appliance manufacturing is at 70.5 percent, medical and optical sensitive device manufacturing is at 82.8 percent and other transportation vehicle manufacturing is at 80.5 percent.
The lack of demand which has followed in the wake of the crisis has hit the manufacturing industry hard, with the overall capacity utilization rate of the industry decreasing even as far as 63.8 percent. Stainless steel is widely used in industrial production, while in Turkey stainless steel consumption in the construction sector is very low. As industrial data decrease, stainless steel consumption declines and firms start to focus their attention on alternative materials. Also, although there are a lot of areas in which stainless steel use is necessary, its areas of application are generally classified under the ‘luxury goods' heading. And when the economic situation deteriorates, the first thing to be affected is of course stainless steel consumption. Thanks to the measures previously taken by stainless steel producers, prices have decreased at a gradual rate to their current levels and firms which trade stainless steel have recorded fewer losses as compared to other sectors. Nickel prices have been fluctuating between the levels of $8,000-10,000/mt over the last four months. In addition, chrome prices have also moved on a stable trend for the past few months. Since this stabilization minimizes the possible fluctuations in alloy extras, it also prevents stainless steel prices from decreasing or increasing sharply.
Recently, Japan's Nippon and Smunkin Stainless Steel Company (NSSC), one of the largest stainless steel producers in the world, announced new offer levels for local trading firms. Accordingly, prices of nickel series cold rolled stainless steel products have decreased by Yen 60,000 /mt ($609/mt), while prices of chrome series cold rolled stainless steel products have dropped by Yen 43,000 /mt ($436/mt) - both for March shipments. In the last two months Japan has seen the greatest contraction of its industry of any country in the world. Turkey comes second in the ranking in question. Both in industry in general and in the stainless steel sector, the effects of the financial crisis have been considerable. Nevertheless while alarm bells are ringing in the industry, the fire has not happened yet.