Last week the Chinese government announced the implementation of new export tariffs on steel products effective as of June 1, 2007. Consequently, other steel products, including merchant bars, will now be subject to an export tariff, following the already-existing export tariff on billet. The new export tariff for merchant bars will be 10 percent. Chinese prices for merchant bar, now selling for June shipment, are on an upward trend. Angle offers for June shipments rose from $520-530/mt FOB to a current $540-550/mt FOB. Therefore, demand for Chinese merchant bars has slowed down.
We mentioned before that demand for Turkish merchant bar exports had slowed down. August shipments are being mentioned for NPU and NPI and July shipments for angle and flat bars. Export offers for angle are at $650-660/mt FOB, while flat bar export offers are at $660-670/mt FOB. After the announcement of the new Chinese export policy, demand for Turkish merchant bar seems to have increased.
Domestic merchant bar prices are almost at the same levels as export prices. There is not much activity in the Turkish domestic market on the eve of the country's parliamentary election. Last week, angle prices were at TRY 875-890/mt ($663-674/mt), excluding VAT, while flat bar prices were at TRY 875-895/mt ($663-678/mt), excluding VAT. In addition, NPU and NPI prices were at TRY 880-890/mt ($667-674/mt), excluding VAT.
There was a certain amount of activity experienced in the billet market last week. Turkish mill Isdemir announced that it had completed its July shipment billet sales. Furthermore, Turkish mill Kardemir closed its sales after selling at $512/mt. Although these sales have jazzed up the billet market, they have not had much effect on the domestic longs market yet. In the merchant bar group, the main customers were the rolling mills, which were producing for export. Rolling mills producing only for the domestic market are unsure whether to purchase billets or not due to the stagnation in the domestic market. Domestic mills' billet offers for the local market are at $520/mt ex-works, excluding VAT.
The Chinese export tariff increase may also affect billet prices as well as merchant bar prices. If the producers that prefer Chinese billet increase their demand for Turkish and Ukrainian billet, this may affect the merchant bar prices.
Demand is strong in Europe, especially in Spain and Italy. Merchant bar prices declined in Greece. Domestic angle prices, which were at around €590/mt in early May, dropped to €575/mt in mid-May. Demand is not very active in Greece, but the signals are positive.
Taking into consideration that Chinese merchant bar have entered Europe, there will be an increase for Turkish merchant bar demand due to the new export tariffs.