Turkish Export Expectations for Billets and Rebars. November 7, 2002

Turkish Export Expectations for Billets and Rebars. November 7, 2002

Turkish mills made their billet export bookings for November/December shipments mostly at FOB $210/mt level. Besides some producers have already taken orders for January. It is strongly believed that billet export prices will be raised further up for January shipments. Producers need to see the pricel levels of FOB $215. Currently, these prices are not confirmed by the buyers. Therefore the reactions from Far East market would better be experienced at first. In Taiwan, where a serious amount of steel billet import has been made within year 2002, best price given by importer rolling mills for vanadium added materials is around $230/mt CFR FO level as of today. However, considering high freight rates acceptable price for Turkish mills should be at around $245/mt level. Turkish billet exporters currently offer above $235/mt CFR FO for January shipments depending on the expectancy that the freight rates will ease off to $21-22/mt for handymax shipments at that date. However no positive buyer response has been confirmed yet. At this point we believe there are some break even points that should be taken into consideration. At first hand, there is no obligation for Turkish steel billet exporters to export into Taiwanese market. Furthermore, if Turkish mills refuse to effect sales within 1-2 months due to low price levels in the market, it is obviously seen that Taiwanese rolling mills will will have to face a serious supply problem, as there is a decrease in imports to Taiwan from the traditional vanadium added steel billet exporters like South Africa. It is believed that the recent limited Ukranian origin vanadium added steel billet bookings will not have a serious effect on the situation. As stated above, Turkish steel billet exporters have no obligation to export into Taiwanese market. Iranian, Egyptian, Saudi Arabian and even Israeli and Greek markets create a strong demand when referred to grand total which keep Turkish mills at full capacity. Consequently it can be said that, Turkish mills being happy with smart prices in the local market will not effect shipments to Taiwan until price level in Taiwanese market does not reach desired levels and such case will take prices up above by creating a lack of supply, unless the rolling capacity is not decreased in Taiwan. Turkish mills hold all the cards when compared with Taiwanese rolling mills. In addition to the facts stated above, taking into consideration the domestic demand which will get stronger after the winter season and the possibility of China reentering the market, billet markets show positive signs of recovery in short and medium terms. Apart from these, Turkish mills' rebar export prices are currently at the range of $225-235/mt FOB levels whereas in Europe, prices are at the range of €245-255/mt which is pretty remote from being attractive under the present circumstances for importers. On the other hand, though prices in Gulf market are around $255/mt CFR level, producers effecting shipments in high volumes like Colakoglu, Habas and Diler still prefer to proceed cautiously and ask for $260/mt, considering the possible rise in insurance premiums and freight rates due to the war risk. In Israil buyers are willing to make their purchases at $250/mt, however offers are at the range of $255-260/mt. It is believed that the repeal of rebar quotas on Turkish rebar by Israil will not have much effect as the exports to Israeli market are 200-220'000mt per year no matter whether the quota exists or not. The point is that producers effect shipments in a disciplined manner, in order to prevent the prices from falling unnecessarily due to a sudden rise in supply. According to our prediction in case there are no factors like a possible war in Gulf, political uncertainty in the local market and economic woes which may thwack Turkish mills' Gulf market sales, the penetration of the inexperienced producers to the market with low price levels spoiling the stability in the market will be the only reason which may prevent producers to maintain to the program. After all, the key point is not to take other markets like Gulf or Far Eastern markets as a referance while making sales into Israel. As US market has lost its attractiveness because of the extra 15% duty in the form of safeguard measures implemented to Turkish rebar, imports reaching to desired figures in US market is now far away from eventuality. Only previous bookings are shipped to the US market where the maximum duty paid price is at the range of $270-275/mt CFR FO level. Under these circumstances, our forecast is US market will be out of reach till the second quarter of 2003. Commercial Manager of a Turkish Steel Producer