Evaluation of galvanized steel market in 2003
Galvanised steel trade was not very smooth during the year 2003 mainly due to sudden price increases caused by Chinese purchases of flat products including coated material, and consequent corrections and expectations of recurrence of price hikes. Supply was tight in the European market during the first quarter of the year, with the producers reducing their supplies aiming to avoid any price softening. Most of the products were sold to the automotive industry. Producers were only accepting to deliver for the third quarter, which inevitably resulted in price increase in Europe. By the beginning of the second quarter, Turkish producers reduced their prices by around $20/mt in line with softening feedstock prices under the impact of the Iraqi war, as well as the effect of heavy winter conditions. Decreasing prices and the slow demand led Turkish producers into exports as well as regular supply of industrial manufacturers in the local market. Producers that paid necessary attention to exports and their local industrial manufacturer customers at the bullish times, succeeded to overcome the hard times easier. The price softening seen in the feedstock during the second quarter was also reflected to the galvanized steel prices and this stranded the producers who booked their feedstock at higher prices. The excessive appreciation of Euro during this period encouraged the European market to import, and at the same time, decreasing prices resulted in frequent purchases of small quantities from local stockists and service centres. This situation put the Turkish producers in difficulty in the European market, as they failed to compete with such low prices. The approaching summer season did not revive the demand as expected by the end of second quarter and beginning of third quarter. Although not much activity was seen, Turkish producers have increased their prices as scheduled. However, that time the price increases were related to a rise in feedstock prices rather than a demand increase. Turkish galvanised steel market jumped $25-30/mt during that period. Especially in the third quarter, price differences of about $60-70/mt were observed among the Turkish producers, as their prices were not increased homogenously. Export offers during the same period were $30-70/mt cheaper than the local market prices. We see that export prices were a lot more realistic than the local market prices, when compared to the global price levels. The imbalance among the Turkish producers in terms of local market prices required a correction and at this stage the producers have revised their prices in order to secure market stability. As a result of these endeavours during the second half of July, the ceiling price in the market retreated by $5-10/mt, while the base price was up by $30-40/mt. Hence, price levels of all Turkish producers arrived at more or less at the same levels for certain thicknesses while the traditional price difference of $20-30/mt was maintained for others. During all the above developments among privately owned producers, Erdemir, the sole flat steel producer in Turkey have not changed its galvanised steel prices, even though it increased the prices of both hot and cold rolled steel sheets. We can say that Erdemir preferred to stay close to the floor price levels for most thicknesses. Various speculations were made for the last quarter, particularly for the European market. The market was divided into two groups in the expectations of the price reduction or increase; while the usual way was to discuss the levels of price increase. Both groups have their own reasons to defend. The reasons can exceed this article's scope therefore we switch to our expectations for the fourth quarter. If this article had been written in the first half of August, we would have mentioned that the European producers had not declared the last quarter prices yet, because of not knowing where the market would go. Also a possible balancing of prices in relation with import flow expectations into Europe with the new quotas coming into force on October 1, and a price decrease towards the end of the year could have been cited. However, certain developments in the second half of August lead us to perceive the situation as follows: Depreciation of Euro and the stability seen in Chinese market after a period of price dipping, prepared grounds for expectations that the prices will at least maintain their current levels or even increase, particularly in Europe. We believe that a price hike will be seen by November, and thereafter start to ease off, due to the reasons explained in the above paragraph. Purchases in the local market will keep its trend till the weather conditions deteriorate. This can be interpreted as no price decrease to be expected at least for a while. In local market, both the heavy weather conditions and the decreasing trend of prices will start showing effect from November onwards. It seems, 2003 has not been a very remarkable year for the galvanized producers; and hence it is more logical for the producers to develop new strategies for 2004, rather than trying to secure the performances of 2003.