The target of the Turkish government to allocate large rebar volumes within the framework of the projects to rebuild cities in the Iskenderun region in the coming three to four months has raised many discussions in the country’s steel market. Many details remain unclear and are to be revealed in the short term, following the discussions to held with mills. In the meantime, steel market players are trying to access the possible effects on the market balance and price trends.
Since mills’ rebar capacities in Turkey were not being utilized to the fullest before the earthquake, there is certainly the potential to increase production at mills. Being the largest rebar producer in the MENA and Mediterranean region, Turkey has the capacity to cover the announced demand for 4 million mt. In fact, large volumes are to be sourced from the Iskenderun region-based rebar producers, which are expected to restart operations shortly. According to the market information, the facilities were not critically damaged by the earthquakes and discharging in the region’s ports has restarted, though the welfare of personnel remains the main concern.
However, taking into account that the disclosed requirement is 4 million mt of rebar alone, the main concern is the sourcing of enough scrap or billet within a rather limited period of time. For that, the mills will have to book significant additional scrap or/and billet feedstock which cannot be done easily, quickly, and at reasonable price levels. “If these projects are serious and going ahead, it will mean a huge addition to normal scrap imports and higher billet demand could be seen,” a trader told SteelOrbis. Another issue is, whether Turkish sea ports have enough capacity to handle the additional scrap capacity easily. As a result, many expect price upturns in the market for raw materials, semis and finished steel. However, some share the expectation that the rebar prices for these projects must be regulated in order for the whole issue to not create a disturbance in the market.
In such a situation, many question whether the government would consider relaxing the import duty for billet, which is at 24 percent and subject to the inward processing regime. All origins except Malaysia are included. “This huge rebar demand is to be generated domestically, which will mean that some mills will certainly increase their billet imports with no considerable rise in their steel exports. As a result, something may be done in terms of the export licenses, at least for the assigned suppliers for this [rebar] demand,” a source told SteelOrbis. Another issue is the potential availability of billet in the market according to the expected increase in demand. Asian and GCC sellers are offering on and off and Russia supplies limited volumes and, even if increased, they might not be enough. “Of course, it will depend on the price. Once there is a high price, there will be suppliers. But I would bet on Algeria and Asia, aside from Russia of course,” a source said. In addition, the domestic billet supply to the free market is expected to be reduced, which will force local re-rollers to source imports in larger volumes.
While the abolition of the import regulation for billet is considered an option, the 30 percent import duty on rebar is set to remain intact, many market sources assert. Taking into account that Turkey is capable of meeting the announced demand by itself, no rebar imports will be required and cancelling the duty is for now considered as an extreme and unnecessary measure which could damage the domestic steel industry.
