Speaking at the 5th SteelOrbis Turkish Steel Market Conference held in Istanbul on November 26, Burak Büyükfırat, automotive and white goods director of Turkish integrated steelmaker Erdemir, said that the volatility in steel prices is primarily based on changes in raw material prices, even though steelmakers do not wholly reflect raw material prices on to their sales prices.
Stating that Turkey's flat steel production in the first nine months of this year reached 9.04 million metric tons compared to 5.67 million mt in the corresponding period of 2009, Mr. Büyükfırat went on to say that Turkey is expected to reach a flat steel production capacity of 14 million mt in 2011, with expected flat steel imports of six million mt. Given that the country's anticipated flat steel demand next year will reach 12 million mt, Turkey's flat steel over-supply could be eight million mt for the year in question, thus forcing steelmakers to export their flat steel products. Accordingly, the Erdemir official said he foresees that Turkey will become a net flat steel exporter in 2011.
Mr. Büyükfırat underlined that as of November this year iron ore prices have surged by 101 percent, while scrap prices have gone up by 24.5 percent, with coke prices rising by 18.2 percent - all compared to January price levels. Meanwhile, the highest increase in flat steel prices year-to-date in November was recorded at 22.5 percent in Europe.
Noting that, from 1990 up to 2004 the average iron ore price was recorded at $17.98/mt with the standard deviation at 13 percent, Mr. Büyükfırat showed that starting from 2005 up to this year the average iron ore price has reached $71.47/mt, with the standard deviation climbing to 34.19 percent. In the meantime, in the 1990-2004 period, the average coking coke price was $49.1/mt, with the standard deviation recorded at 10 percent, while the average price surged to $158.1/mt in the 2005-2010 period, with the standard deviation reaching up to 47 percent. These standard deviation rates, Mr. Büyükfırat stressed, surpass the standard deviation rates for hot rolled coil prices (27 percent) and even the rates in the gold market and in the Istanbul Stock Exchange (IMKB). "The high volatility does not appear to be temporary," Mr. Büyükfırat said, adding that steel producers and consumers have to manage the risks together.