Merchant bar producers in southern Europe have lately been concluding deals to the Middle East, North Africa and South America. Meanwhile, they have been concluding fewer sales in their own domestic markets due to sluggish demand there. In the export markets these producers have been able to achieve the price levels they were seeking and therefore have concluded a certain number of deals; however, when they ask for the same price levels in their domestic markets, end-user demand is below the desired level.
We had mentioned in our previous analyses that the Italian and Spanish producers would increase their base prices due to the continuously rising scrap prices. In the local Italian market, the base prices of merchant bars of 140 mm and below sizes have increased to €500/mt ($777/mt). It is expected that the base prices will follow the same path in Spain. The merchant bar producers in the latter country had set their base prices in late April as follows: €400/mt ($622/mt) for 180 mm and below (IPN-UPN), €520-540/mt ($808-840/mt) for 80-600 mm IPE, H-profiles, and 200 mm and above sizes of IPN-UPN. It is expected that the Spanish producers in question will pass the scrap increases on to their prices as of the coming week. Meanwhile, the price range of 140 mm and below sized merchant bars in the local Italian market is €715-765/mt ($1,111-1,188/mt) ex-works on actual weight basis, extras included, excluding VAT. It is also expected that these price levels will be affected by the scrap cost increases.
Over the last 10 days merchant bar prices in the local Turkish market have increased by $150/mt (same margin as the local billet price increase during the same period), despite the low demand in the domestic market. The end-user firms have already been facing difficulties in making purchases and are now in danger of having to temporarily halt their projects following the abovementioned increase. The traders and end-user firms, both of which have favored a waiting strategy and opted not to buy materials due to the considerably high levels of long products, are now in great difficulty because of the continuing price upward trend. The same problem has been experienced in countries that have very significant merchant bar production capacities, such as Italy and Spain. These countries are registering a relaxation in their export market tonnages and figures, while their local markets are sluggish at the moment.
While billet prices have been at around $1,000/mt in the local Turkish market, merchant bar prices on actual weight basis in Turkey's domestic market, depending on size, thickness and region, are at the following levels: small IPN-UPN are priced at TRY 1,390-1,430/mt ($1,097-1,128/mt), 100-120 mm IPE are at TRY 1,420-1,455/mt ($1,120-1,148/mt), angles are at TRY 1,390-1,425/mt ($1,097-1,124/mt) and flat bars and square bars are at TRY 1,400-1,445/mt ($1,105-1,148/mt). The merchant bar producers are hesitating to give price levels in the local Turkish market, where billet price levels of around $1,100/mt are being mentioned at the moment. It is expected that the merchant bar producers in Turkey will set their prices after they watch the development in the market today, and also according to the developments in the export market.
Turning to the Turkish merchant bar export market, it is reported that Turkish rolling mills are currently offering angles for export at $1,140-1,150/mt FOB on actual weight basis for June shipments. In addition, flat bars are being offered at $1,150-1,160/mt FOB, 80-100-120 mm IPE is being offered at $1,200-1,210/mt FOB, IPN-UPN are being offered at $1,150-1,160/mt FOB and 80-100-120 mm IPE AA is being offered at $1,210-1,220/mt - all on actual weight basis and also for June shipments.
Even if the Turkish merchant bar producers' prices are level with those of their European competitors, after transportation and other costs have been added to these prices, the Turkish merchant bar producers are out of the European markets. Even if the Turkish producers manage to get their price levels as low as those of their European counterparts, the local players in Europe are able to dominate their own market, this time due to the sluggish demand level.
Overall export market prices, which were at considerably high levels four weeks ago, subsequently resumed a more stable trend due to the fact that China offered to the Middle East market in spite of its 15 percent export duty. After making its effect felt in the overall markets, China again exited the export market on account of its export price increases which were inspired by rising costs. However, following the rapid increases over the last ten days, the rising export market has once again become attractive to China. In the view of the increasing prices, at what levels are the Chinese producers likely to give their offers? The coming week will provide some enlightenment as to the answer to this question.