As we enter the last month of the current year the Turkish flats sector is seeing a continuation of its decreasing price trend. The most important issue talked about in the flats sector in previous weeks was that the report that one major pipe mill operating in Turkey had purchased a high tonnage of material from Erdemir. In recent days during which demand has been standing at low levels, such a move can be seen as an effort by Erdemir to overcome its cash shortage. Also, it is known that the amount of material that Erdemir is offering for sale has increased with the commencement by Isdemir of its flat productions. All these developments show that if Erdemir feels any cash shortage it will not refrain from selling its materials below the level of its listed prices to firms willing to purchase materials at high tonnages and for the long-term. Similarly, it is obvious that if Erdemir does not experience any difficulty in selling its materials then it will not lower its prices below certain levels.
The situation is even worse in the automotive sector which is one of the most important sectors as regards flats consumption in Turkey. Due to the sharp decline seen in automotive sales, many firms have been conducting long-term production cutbacks in order to avoid being left with unwanted quantities of unsold materials on hand. In expectation of a decrease of up to forty percent in orders given for the new year, manufacturers in the sector have moved to decrease their production volumes. Some mills have laid off staff or announced two or three weeks of leave for workers. As a result of the economic downturn, the downstream firms in the automotive sector, which usually make purchases at least on a quarterly basis, are unable to foresee the future developments in the market and so have decided to delay their purchases. Following the determination of order amounts for the year 2009, firms operating in the automotive sector will try to conclude deals with the steel producers. However, the sector is not likely to show improvements within the coming month. Meanwhile, after January 2009, it is expected that buyers in the automotive sector will sit around the table with the steel mills. Nevertheless, it is obvious that purchases in 2009 will be below the figures for 2008.
Due to the continuing supplies of materials for ongoing projects in the panel radiator sector, the shrinkage seen in this sector is slightly lower than in other sectors. In this context, steel service centers working closely with the panel radiator sector have said that they are pleased with the purchases of the sector in question.
Meanwhile, a contraction has been seen in sectors which are dependent on the purchases of individual consumers, e.g. the white goods sector. However, this contraction measures only about fifteen to twenty percent. Although decreases are seen in the production of many items, when the items in question do not come under the heading of luxury consumption, then the shrinkage is lower compared to other sectors.
On the other hand, the shipbuilding and machinery sectors have been significantly affected by the general shrinkage, and they have been experienced difficulties against the background of the decreased numbers of projects.
Given the general contraction experienced by certain sectors which use flats products, it is a normal to expect demand for flat products to be show a decline. Flats demand will show a recovery when an improvement is seen for bank lending, general confidence levels in the sector and in the number of investments being made. However, there are many views about this process. In general, it is thought that no improvement will be seen before the third and fourth quarter of 2009.
Looking at the domestic prices in Turkey, the base prices of Erdemir production 2 mm HRC are in a range of $500-550/mt, excluding VAT, whereas ex-Russia and ex-Ukraine materials are at the level of $450-480/mt. These offer levels show variation depending on whether they are for cash or deferred payments. Firms with high stocks may sell their materials at lower prices for cash payments.