Have domestic HRC prices in Turkey hit the bottom?

Over the past week, demand in the local Turkish hot rolled coil (HRC) market has remained slack. Although Turkish buyers have been unwilling to conclude deals before CIS-based HRC suppliers give new offer prices to Turkey, they have continued to make bookings from domestic producers in order to meet their immediate needs. As a result of negotiations during actual transactions, Turkish producers’ have decreased their prices by $30/mt on the lower end and by $20/mt on the upper end as compared to the previous week to $470-500/mt ex-works. However, some Turkish HRC producers have been unwilling to accept firm bids below $500/mt, since the import duty implemented for rolling mills has been increased to six percent from 3.5 percent. The higher import duty is not expected to cause a significant decline in HRC imports in Turkey since imports within the scope of the inward processing regime will not be affected. As Turkish pipe producers, who had been paying nine percent import duty, have been included in the rolling mill category, their HRC imports may increase in the coming period as the import duty they have to pay is now six percent.

On the other hand, positive developments include the news that US and Chinese officials are to hold talks to resolve problems between the countries, while there are expectations that the US may reduce the 50 percent duty imposed on Turkish exporters to 25 percent again. Also, the European Commission’s new import quotas are not expected to harm Turkish HRC exports and this supports positive sentiment among Turkish market players. Meanwhile, there is a strong belief that flat steel prices in the global market have reached the bottom, due to the slowdown of the downward movement of global flat steel prices and also since Chinese flat steel offers to the export markets have switched to a sideways trend. As a result, import HRC offers to Turkey are not expected to decrease and, accordingly, the pressure on domestic HRC prices is likely to come to an end.

As for the spot market, trading activity is still being impacted by the negative economic situation and downsizing of companies amid their problems in obtaining credit. For now, spot HRC prices in Turkey have remained unchanged week on week, though most market players think that traders’ prices may decrease in the coming period following the declines in producers’ prices.