Weak demand and strong dollar push down flat steel prices in Turkey

The Turkish domestic flat steel market has remained quiet again this week. Transaction activity is still on the weak side, while demand has continued to remain low. In line with the sluggish demand, both producers' prices and spot prices have softened by about $15-25/mt this week. However, this price decline has failed to trigger new bookings. Since it is widely thought that local flat steel prices have not yet hit the bottom, traders keep on delaying their bookings, anticipating that prices will drop further.
 
While weak demand and seasonal factors appear as the main reasons for the price drop at first sight, the ongoing strength of the US dollar against the Turkish lira also contributes to the situation. Recently, with the $/TRY exchange rate approaching 1.65, the value of the US dollar has attained its highest level versus the Turkish lira in the last 26 months. If the US dollar maintains its strength in the coming weeks, producers and trading companies may focus more on the export markets due to the exchange rate advantage. On the other hand, some market players foresee that the US dollar will weaken in the coming period and the $/TRY exchange rate will regress down to 1.55 by the end of the summer.
 
On the end-user side, flat steel demand has maintained a sideways trend due to the summer lull. While the Turkish automotive industry maintains its good performance, the main automotive main industry as well as related sub-sectors have continued to make their periodical flat steel purchases. Thus, the flat steel purchases of automakers who buy material directly from the producers are at good volumes. However, automobile manufacturers who purchase supplies from the spot market are facing difficulties due to the poor product mix in the market and they are waiting for traders to start buying again. Activity in the Turkish machinery and shipbuilding industries is sluggish, while activity levels in the electrical appliance and radiator industries have remained unchanged.
 
For its order books for September production Turkish integrated steel producer Erdemir is offering hot rolled coil (HRC) to the domestic market at the base price level of $750-760/mt ex-works, while its 1-1.5 mm cold rolled coil (CRC) prices stand at $910-920/mt ex-works.
 
Since the beginning of this week, spot flat steel prices in Turkish domestic market have shown a softening of $15-25/mt. Accordingly, in this week's Turkish domestic spot market HRC offers have been at $750-760/mt, while 1-5 mm CRC offers have been at $890-900/mt, with prices of thinner CRC specifications at $940-960/mt, all ex-warehouse.
 
On the export side, Turkish flat steel producers have decreased their HRC export offers this week. Due to the weakening of the euro against the US dollar and tepid demand in Turkey's major flat steel export markets, Turkish producers' HRC export offers have declined to $745-750/mt FOB.