The second SteelOrbis Market Talks Meeting in the current year, held in the northwestern Turkish city of Bursa this week, was attended by almost 200 people from different parts of the steel supply chain including automotive and auxiliary industries, the machinery industry and steel producer companies. The main issues discussed were plans to increase Turkey's steel exports and fluctuations in prices of raw materials and finished steel products.
"Producers need to listen to customers"
Aysen Ustunay, marketing director of Russian steelmaker MMK's Iskenderun-based Turkish subsidiary MMK Metalurji, informed participants that customer demands are changing day by day and that steel producers have to be flexible when meeting these demands in order to protect their position in the steel market. "Years ago customers had to buy what was produced. Now things have changed and customers have the advantage when dealing with producers," she said. The MMK Metalurji official went on to say that producers need to listen to customers and focus on their needs, adding that MMK Metalurji has plans to produce different kinds of steel in the future.
MMK has no plans to produce hot rolled sheet this year
Informing participants about MMK Metalürji's present situation and future plans, Ustunay said, "Our annual output capacity for steel products is 2.5 million metric tons for hot rolled sheet, 800,000 metric tons for galvanized products and 400,000 metric tons for PPGI (pre-painted galvanized iron). Last year, we had a satisfying annual production volume for galvanized and PPGI products, with a total output volume of 700,000 metric tons, while we processed 150,000 metric tons of steel products at our steel service center. However, due to global economic conditions, we had to halt our hot rolled sheet production last year and, unless we see major unexpected improvements, we do not plan to start production again this year. The price gap between Turkish domestic hot rolled sheet and imported US prime quality scrap was nearly $300/mt in 2007. Today this gap is under $200/mt. The Turkish finished steel price has decreased by $330/mt from its highest level in 2011, while there has not been any such decrease in scrap prices. We may say that this situation occurred because of the global economic contraction. The margin between raw material and finished product prices is difficult for steel producers to deal with. Investments have started to decrease and buyers have tended to import to meet their hot rolled sheet requirements. Even if our hot rolled sheet plant investment in Iskenderun does not meet expectations right now, we believe that it will provide an advantage to our company in the long term, due to its proximity to developing African countries and the Middle East. On the other hand, we have a 60 percent share in the Turkish domestic PPGI market and we have no problem in our export markets for PPGI and galvanized sheet."
Appreciation of dollar has impacted flats market negatively
Speaking at the event, Nazlı Keseli, flat products analyst at SteelOrbis, shared information regarding the impact of raw material prices on the hot rolled sheet market. "Turkey's major scrap import sources are the US and Europe. Following their latest purchases, Turkish hot rolled steel manufacturers have almost completely met their requirements. We know that the US suppliers want to raise their scrap prices, but there has been no similar increase in finished steel prices and so it seems the planned rise in scrap prices is unlikely to be accepted. Today the price difference between scrap and finished products is $200-210/mt and so flat steel producers are operating at a very low margin. The current Turkish hot rolled sheet ex-works price is $560-580/mt. Also, the appreciation of the dollar has had a negative impact on flat steel manufacturers and consumers. Costs increased suddenly and consumers in the domestic market insisted on prices being fixed to the Turkish lira. However, traders and steel service centers appeared unwilling to sell their products and this is why February was a tough month. On the other hand, there is competition between China and the CIS in the Middle East, while Africa is a new market. Considering everything, it is true to say that we are experiencing a transition process and that this process is a difficult one. A recovery in the steel industry is expected to be seen in 2017.
SteelOrbis Market Talks Meetings will continue in Ankara and Iskenderun later this year.