As the Turkish lira has depreciated by almost 70 percent against the US dollar since the beginning of 2018, Turkish welded pipe producers’ production costs have increased significantly since they are using imported material in their manufacturing process and also since energy charges in the country have been raised. Meanwhile, the Turkish government has banned most export proceeds from being held abroad, stating that 80 percent of such proceeds must be deposited at a bank in Turkey. Considering the process of converting foreign currency gained via export sales to local currency and buying foreign currency again in order to import raw material, it seems this regulation will cause financial damage twice over to Turkish mills and will increase their production costs further. Turkish welded pipe exporters are expected to be negatively impacted by this regulation.
Meanwhile, after the US government doubled the import duty on Turkish steel imports from 25 percent to 50 percent, Turkish welded pipe producers have started to look for new export destinations and they are expected to direct their cargoes to the nearest market, the EU, as a first step. However, since the EU has started to impose quotas on welded pipe imports, equal to 55 percent of its average annual welded pipe imports for the last three years, it seems risky to rely on export sales to this market, as it is not a sustainable alternative for Turkish mills in the long term.
As Turkish welded pipe exports have not increased as much as expected, Turkish producers’ offer range for ERW pipes and hollow sections with 2-4 mm wall thickness made from hot rolled coil (HRC) of S235 grade as per EN 10219 to their export markets has remained stable week on week at $640-670/mt FOB.