The steel market in Turkey is nowadays witnessing an unprecedented situation since the price difference between local rebar and hot rolled coil (HRC) has been increasing and has recently hit around $350/mt on average. As a result, while HRC producers enjoy sky-high margins, rebar manufacturers are being squeezed in terms of their profits due to insufficient demand, mainly in the local market. Slab sellers to the country naturally benefit from the soaring HRC prices, while billet and scrap suppliers find it challenging to increase their deal prices to Turkey.
Local HRC prices in Turkey have increased this week to $970-990/mt ex-works and above in official offers, with the latest deals fixed at around $955/mt ex-works, SteelOrbis has learned. In the meantime, last week the local prices mainly stood at $920-940/mt ex-works. The offers are for the remaining volumes for July production and mainly for August deliveries. Lack of allocation is mainly given as the key reason for the steady price uptrend, coupled with rather solid demand coming from re-rollers and constantly increasing prices in the EU. One mill has continued active and high-priced HRC sales to the US, where the market has been booming. In addition, talks about China canceling the rebate for HRC exports support the positive mood among HRC suppliers, at least for the short run.
The positive HRC market developments provide good support for slab sellers to Turkey and give them the opportunity to obtain some good margins. The latest offers have been reported at $820-835/mt CFR with some deals already rumored as closed within this range. Around two weeks ago, prices were at least $50/mt lower. Moreover, since further price increases are still not off the table in Turkey’s HRC market, CIS-based slab suppliers are foreseen to continue enjoying high-priced sales to Turkey.
As regards ex-CIS billet exports, on the contrary, the situation is not so bright as the price increases in the import market in Turkey have been restrained by the weak rebar market. Taking into account the tough financial situation in the country, which affects end-user activities and the daily steel trade overall, Turkish mills have difficulty increasing local rebar prices far above the current $620-635/mt ex-works and the export price range is at $630-650/mt FOB. In such a situation, the latest billet export levels targeted by the CIS at $600/mt FOB and above will hardly find full support among the Turkish mills unless rebar prices start increasing. Currently, the CIS-based billet producers are seeking support from Latin American buyers rather than from Turkish buyers. However, small and medium-sized traders are bound to try selling to Turkey.
Since early March, HRC prices in Turkey have increased by at least $150-180/mt depending on the mill. However, in the rebar segment, export offers declined from $650-655/mt FOB to $615-630/mt FOB by the end of March, with a modest rebound seen in April so far. The imbalance between HRC and rebar prices in Turkey has had an impact on the steel scrap market situation, taking into account that the extremely high margins on the flats side of business, in theory, allow the mills to accept higher import scrap prices, while in the rebar segment the situation is the opposite. All the HRC producers in Turkey - Colakoglu Metalurji, OYAK, Habas, and Tosyali Holding - are at the same time longs manufacturers and, under the current market conditions, they are definitely focused on the HRC side of their business. In the meantime, the mills who are purely longs producers are in a far less advantageous situation. Hopes exist that the local rebar market will eventually pick up and, in terms of exports, Turkish mills remain focused on sales to Asia. However, most market players agree that prices in the HRC segment will be far stronger in the coming weeks at least if compared to rebar prices.