The effects of the contraction of international wire rod demand have been strongly felt in the Turkish wire rod market. This week, although prices have been trying to maintain their levels in spite of the $/TRY exchange rate fluctuations, anxiety has continued to be observed on the end-users' side in the Turkish domestic market.
Last week, we wondered what kind of strategy Turkish mills would follow given the demand contraction seen in the Turkish domestic market. In this connection, it is observed that some producers have tried to increase their sales tonnages by offering low prices, thus aiming to attract a greater share of the limited demand. Meanwhile, other producers have been trying to maintain their current sales tonnages, though without lowering their offers.
As for the export market for March, some mills - except those who have to deliver previously-booked orders - have started to experience problems in terms of filling their order books, due in particular to the sluggishness observed in the international wire rod market. With regard to the global demand contraction, it is heard that some mills have reduced their production capacities dramatically and continue to implement a shift system in production, while some producers will likely conduct overhauling works lasting from seven to 10 days at their wire rod rolling mills in order to try out new products in the coming days.
In short, it is likely that Turkish mills will continue with their production cutbacks for a while in order to ease the effects of the demand contraction.
This week, the softening trend in the southern European wire rod market has been continuing. In parallel with the trend in the Italian market, in the Spanish domestic market the wire rod price is at the level of €350-360/mt ($448-460/mt) delivered to customer, excluding VAT.
Against the background of decreased scrap prices and low demand in Italy, mesh quality wire rod prices in this market have this week decreased to an average level of €350/mt ($448/mt) delivered to customer, excluding VAT, while drawing quality wire rod prices have declined to an average of €360/mt ($460/mt) delivered to customer, excluding VAT. With regard to the production cutback issue mentioned in our previous analyses, an Italian producer has this week announced its decision to implement a long-term cutback in agreement with the trade unions. With the issue coming more into the open as a result of this agreement, the probability of other producers following the same path has caused anxiety levels in the market to increase. Italian wire rod mills' inventory levels are reported to still be at high levels. Demand has also continued to move on a slack trend this week in Italy.
The markets are still waiting to see the effect of the Dubai government's $20 million bailout plan will have on the iron and steel sector in that country. In particular, in the coming days we will be better able to gauge the influence of the stimulus package on drawing quality wire rod prices in Dubai's domestic market - prices which currently stand at the average level of $450/mt ex-works, excluding VAT. However, market players fear that this package may only have a short-term positive effect. Considering that many construction projects have been delayed or cancelled, the stimulus package in question is not expected to change the direction of the market in a radical way and prices are unlikely to reach the levels seen when they were moving in a rapid upward trend.
As for Ukraine, credit issues predominate in this market, as in many other markets. Also, heavy weather conditions have caused end-user demand to be slow in general. Similar to the Turkish market, in the Ukrainian market some producers have preferred to give offers at low levels and provide favorable terms of payment in order to attract the limited demand. It is heard that traders' offers for mesh quality wire rod are this week at average levels of $450-455/mt ex-warehouse, excluding VAT, in the Ukrainian domestic market. Meanwhile, export offers given from Ukraine for mesh quality wire rod are heard in a price range of $410-415/mt FOB. It is also reported that some Turkish mills' export offers to Ukraine for mesh quality wire rod are in the range of $440-450/mt FOB; however, some other Turkish mills have been offering the same quality wire rod at slightly below the level in question.
In the coming period, we will be watching to see whether Turkish producers' export offers will gain ground in the international market against the CIS offers in terms of quality issues, against a backdrop of hardly any Chinese offers or just high-priced ones.
In general export offers given by Turkish mills to southern Europe are observed to have slowed down due to the contraction seen in this market; thus, instead, they have focused their attention on the Middle East. However, the Turkish mills, who have been observing the international markets closely, have given offers to many countries, including the Far East, and have been waiting for a response to these offers. The response they receive holds a far greater importance in the current period when such significant production cutbacks are observed.