This week's May 1 holidays in Europe, the CIS countries and China have prolonged the ambiguity as regards the global market situation, and as yet there doesn't seen to be any clarity on the horizon.
Following the cancellation of the export tax rebate in China, an increase in steel product prices was being talked of when China announced early this week that it is to introduce an export license system for steel exports. The holiday came just after this announcement, at a time when the effects of the export rebate cancellation had not yet become evident. At present, everybody is wondering what will happen next.
In most of our analyses, we have remarked on the increasing tendency in the Chinese sectional products segment. Sections are one of the main groups of products to have felt the increases in iron and steel prices. The booming demand in Europe this year has led the limited number of producers in Europe to increase their base prices and extras continuously under the influence of the increasing demand. The good booking levels and high capacity utilization rates in Europe have shifted the focus of Turkish exporters from Europe to China. Considering that the US was an important market for Turkish origin sections up to the current year, and that most US imports in 2007 have been realized from China, it is clear that the significance of China increases more and more day by day. Although the Beijing government is attempting to stem the continuous increase in the quantity of exports through canceling the tax rebate and introducing the export licensing system, it seems that China will retain its importance at least for the time being. Nevertheless, it would not be wrong to say that the recent Chinese decisions, along with this week's holiday in China, have impelled buyers to bide their time. Everybody is waiting for the new offer levels from this region, and the expectations generally are that the new prices will be higher.
And what is happening in the Turkish market? In very recent days, it is true that everybody has been monitoring Turkey's political and economic situation. In our globalizing world, every development needs to be monitored closely, in particular these developments experienced during the past week in Turkey which are a source of concern for buyers and sellers, both domestically and internationally. In the Turkish domestic market, stability is continuing as regards sections. The effect of the developments in Turkey is very high in this regard. The construction industry which was expected to revive with the warm weather and in turn to boost demand, seems to have had its revival postponed for a further while. This week, angles are being sold at TRY 875-930/mt, flat bars at TRY 880 - 930/mt, while NPU and NPIs are at TRY 920-930/mt.
This week, due to the upward movement of scrap prices, ex-Ukraine billet prices also moved up and so billet offers at $520/mt CFR are not heard of anymore. Meanwhile, in the domestic market, billet prices are no longer offered at the levels of $570/mt, and the new offer level after the adjustment is around $540/mt. Billet export prices have not changed this week mainly due to the holiday in Europe, and also since the European buyers are still on hold. Again, Romania and Bulgaria appear to be the most active markets. Angle and flat bar export offers from Turkey have varied this week in the range of $670-685/mt FOB.
In southern Europe, domestic markets are calmer, while the domestic markets of northern European countries are more active. €600/mt CFR IPN and €610/mt CFR IPE offers to Spain have not yet been accepted by buyers. Similarly, although new bookings to the Greek market were made last week, buyers in Greece have not fully returned to the market over the last two weeks. Scrap markets are also influential in such a situation. A possible increase in finished product prices thanks to the gain in strength of the scrap markets which began this week may accelerate the return of the market players in this country. Meanwhile, the domestic market in Greece still maintains its stability.
H-beams are another category of sections which are worthy of mention, along with commercial sections. This year, the most important proof of the increase in structural steel consumption is the changes which have been seen in H-beam prices. Normally in Turkey, although this product segment is mostly supplied from the European mills, buyers turned to new markets for the purchase of these products, as the European mills can hardly meet the demand in their domestic markets and are offering fewer products for export. Apart from Europe, South Korea and China have started to become Turkey's shining stars with regard to this product segment.
As is well known, Turkey is a net importer of large-size sectional products. The quantity of exports has increased year by year, speeding up especially after the imports from South Korea and China were added to those from Europe. It seems that real competition will begin in large size sections market when Karabuk iron and steel factory begins production as a result of its investments. Currently, H-Beam offers from Europe to Turkey for end-of-July shipments are at €788/mt CFR. In the domestic market, sales prices vary in the range of €710-730/mt. A H-beam offer from a European producer to Greece for August delivery stood at €750-760/mt CFR for 90-day deferred payment.
After summing up this week's developments, we now have to wait for the situation in the market to receive some clarification when the holiday ends in China and when the European buyers return to the market.