2004 Turkey Galvanized Steel Sector General Assessment
In 2003, we finished off mentioning that 2003 was not a very memorable year for Turkish
galvanized steel producers and that efforts were being made to develop a new strategy for 2004.
Below, using our year-to-date flat product market analyses as a basis, we have done a general assessment of the year's
galvanized steel sector.
JANUARY 2004
The
galvanized steel sector started 2004 with price hikes. In the first half of January, following the price hike of $25/mt enacted by
Turkey's only integrated flat products producer,
Erdemir, private sector
galvanized steel producers also increased their prices. The price increases in this period for the lower end of the market's price range were more and particularly with the impact of the shortages experienced in thin gauges, the price range in the market narrowed. The upper end of the price range that was already quickly increasing upwards in December 2003 also had an impact on this situation.
In January, despite the approaching of the winter season, there was a strong demand for
galvanized steel producers' products. This was explained by the fact that local distributors and industrial end-users, being aware of the ongoing trend of price increases in the market, were willing to keep more stocks with the possibility of more increases on the way. However, the demand coming to local distributors was not as strong as the demand encountered by producers.
The reason for this was that during that period small and medium-sized end-users were doubtful that the upward trend in prices would last. (This upward trend, contrary to the expectations of small and medium-sized businesses, continued until the beginning of March and continued to progress on a plateau until the beginning of May). In this period, we had put forth in our market analyses our belief that prices would continue to increase, especially in the first quarter.
At the beginning of January, an increase in activity was observed in export bookings. One of the factors impacting this increase in export bookings was that producers, wanting to prevent any type of slowdown that might develop in the domestic market, offered more advantageous prices. At the beginning of January, 2.0 mm export offers were at $545-540/mt price levels.
Throughout January, prices caused the stablized increase trend to continue. When the end of January arrived,
galvanized steel producers started to encounter difficulties in procuring new raw materials, namely hot and cold-rolled steel. Even when some material was available, the offers were so high that it led
galvanized steel producers to increase their prices twice within the same month and at the end of January prices had increased by as much as $15-20/mton. The government's elimination of the import quotas also had a major impact on this situation.
At the end of January rumors started to circulate in the market about the possibility of
Erdemir implementing another price increase following the holiday at the beginning of February. In fact, the most active debate that took place during this period was about whether
Erdemir's price hike would occur before or after it collected its February orders.
FEBRUARY 2004
After the long weekend in the beginning of the February,
galvanized market started to show further activity. However,
galvanized steel producers continued to have difficulty in raw material availability. This situation reflected on prices as difficulty continued. Certain sizes increased by $110-90/mt and other sizes surged by $50-25/mt due to the fairly rapid price increases. The increase was more in certain sizes such as 1.00 mm, in which the availability was more difficult.
Indications of price increases from overseas and the expectation of a price increase by
Erdemir in the domestic market accelerated this situation. In this period, it was expected that
Erdemir might increase its prices by $40-50/mt.
Erdemir responded to these expectations by increasing its prices by $55-60/mt on February 11. Contrary to general expectations,
Erdemir announced its price increase before booking its February orders. This was interpreted in two different ways in the market. The first way it was interpreted was that
Erdemir's price increase before the second quarter bookings indicated that cited producer did not predict to have difficulty in booking orders as was expected. The second interpretation pointed out that
Erdemir did not to expand second quarter bookings because of already tight
production.
After
Erdemir's price increase, private sector
galvanized steel producers hesitated to reflect this increase to their prices. However informally $10-30/mt increases were reported, when the price lists were announced it was seen that increases were limited to only certain gauges of raw materials that were not bought from
Erdemir.
This is partly attributed to private
galvanized steel producers' most recent price increases before
Erdemir's price increase on February 11. Further price increases are not expected as high priced producers reported increases between $25-90/mt and low priced producers between $50-110/mt. Moreover, it was considered that the market might not be ready for the second price increase. Informal discounts, which were implemented on the
galvanized steel producers' formal price lists, proved this situation. Besides, the new price increase was not expected while reducing existing prices. The discounts did not maintain standard and show disparity from one order to another.
However, due to
Erdemir's second price increase in the same month of about $70/mt on
galvanized steel, and due to the base price being increased to $640/mton, private sector
galvanized steel producers could not keep their prices at the same level and increased prices $10-50/mt, depending on size. After the new price hike, particularly big industrialist customers' demands for discount showed an increase.
MARCH 2004
The upward trend in Turkish
galvanized steel prices continued because the price offers received for raw material supply maintained their high levels in the first half of March.
Erdemir reflected only half of its increase of $70/mt to its orders and this situation immediately gave rise to rumors that
Erdemir would increase its prices again by $30-35/mt. Due to the market's slowdown; this additional price increase was believed to be delayed. Upcoming local elections also supported this
opinion. Due to this
opinion which had a strong influence toward the end of the month,
trading companies who had raised their prices based on their expectation of
Erdemir's price hike, with the hope that only half of
Erdemir's expected hike would be reflected on prices, traders reduced their prices in order to activate the market. After this, prices moderated by $15-20/mt, but we felt this was more of a market correction than a price decrease.
However, this ease was seen in commercial quality material such as 2.00 and 3.00 mm hot rolled steel. Another reason that supported this situation was that certain traders, who enter the market because of the high profit margins, wanted to dispose of goods. Traders, who are not dealing with iron-steel commerce, needed to sell goods in their stocks and transformed it into profit because of the competition for imported materials in the domestic market after the import tax for cold and hot rolled steel decreased.
In this period, the difference between the low and high end price level in the
galvanized steel,market, which is usually between $20-30/mt, reached $100/mt. This difference was experienced by the drop in low price level and this increased the unofficial discount over official price lists of producers at the high end. As of March, discounts grew up to $50-75/mt depending on base material and coating thickness.
APRIL 2004
In the market, despite the expectation of increased activity due to the coming of summer and the associated increase of activity in the
construction sector, no activity was seen. Different market players were of the
opinion that the fact that prices were rising was not important as there was no availability in the market and even if the availability was found, only small tonnages were found, therefore there was no desire for purchases.
Erdemir affected the expected $40/mt price increase on April 9, 2004. The increase reflected on the prices of traders, who had previously tried for a market correction and reduced prices by $20-25/mt.
Due to the cut in import duties and the shortage of material in domestic market, mostly imported materials, such as Romanian and Russian cold rolled steel and Bulgarian and Romanian hot rolled steel were available in the market. Imported materials brought activity to the market.
In this period, no new price lists were announced for
galvanized steel however price adjustments were made with the amendments made in unofficial discount rates.
MAY 2004
In mid-May, no activity was recorded in the market. The main reason for this was that end-user companies, who supplied materials while prices were increasing, gave the priority to the usage of their materials following the softening in the prices. Therefore, there was no turn to the market for new purchases. The slowdown in the market caused difficulty even for traders that booked materials for July.
For the reasons cited above and the low-priced Ukrainian and Romanian-origin steel in the Turkish market, a reduction of $30/mt was recorded in the prices. One of the main drivers behind this reduction was the fact that traders, which despite not normally dealing with steel
trading entered the market seeing the high profit margins, then exited the market, having concerns with the softening in the prices. At that time, the point we underlined was the fact that steel that were imported from
Romania at low prices stemmed from their being the old orders that were booked when the prices were not yet high.
Again in the same period, Corus, Arcelor and Thyssen announced price lists containing different increases.
Based on the subject increases,
Erdemir was said to be likely to increase its prices in
Turkey. When we took into consideration the fact that July orders' had already been booked, the rise in the availability of low-priced imported material, and lastly the possibility of orders received for exports being lower than domestic prices, we thought that this did not reflect the reality of the market. This is true because we think that following prices by taking West European price movements into account may be misleading. Instead of the West European market which is closed and therefore the effects of developments are seen later, we believed that better results may be adopted by following prices in Asian and
Middle East markets together with the Russian and Ukrainian prices.
The fact that
iron ore prices kept their levels in May, leading to a softening in the prices of
slab, paved the way for flat product prices to remain stronger than the prices of other product groups. China-oriented speculations and the exaggerated presentation of the measures taken by the Chinese government led market players to leave the market hastily, however did not have an exaggerated effect on the prices.
The competition among local
galvanized producer firms softened the prices.
The reduction in
galvanized steel products in May mostly affected high-level prices in the market and the price differences reaching $100/mt regressed to the price range of $15-20/mt, a range with which the market is more familiar.
JUNE 2004
The softening in prices which started in the second half of March and continued until the end of May, in June again regained its upward trend which still continued on a regular basis.
Since the beginning of the month, an upward movement was seen in domestic market prices, particularly of
galvanized material. On the other hand, there was no similar rise observed in uncoated flat product prices, which caused confusion in the minds of some..
American,
Europe, and some
Middle East markets' strong course of business increased the export bookings to these countries. As a result of attractive export orders, prices started to move upwards in the local market. Producers that did not book many export orders took advantage of this gap in the market and pulled their domestic prices upwards.
In the June domestic market, depending on the buyers' purchasing power and the stock in sellers' hands, materials of the same thickness showed very different prices in the market.
JULY 2004
Within the first half of July, due to raw material shortages and the beginning of exports bookings, Turkish
coated flat products prices, which had remained at the same levels for some time, now show an increase of around $20/mt for some gauges as a result of certain raw material shortages and export bookings. This price increase was particularly seen in certain thin gauges and 0.50 mm thicknesses. Some producers in the prolonging of their deliveries also supported the nature of the price increase.
In the second half of July Ukrainian origin flat products experienced a price increase in the rate of nearly $50/mton. In the market, talk of
Erdemir raising its domestic prices started to circulate.
We had firstly believed that the gap between Russian and Ukrainian prices was too wide and needed a correction. Secondly, even with the aforementioned price increase the
CIS prices were still lower than
Erdemir's prices. And thirdly, we indicated that the offers for
Erdemir's last export tender, while in certain markets higher than previous tenders, were still lower than expectations.
At the same time, we also stated that the flat products market would still go on strong with a smoother ascending trend in prices. We had also noted that further price increases coming from
North America and the likelihood that
galvanized coated products' prices would see a more evident incline due to the increase in the prices of imported raw material.
Due to the continuing raw materials shortages,
galvanized steel prices in July's second half increased again. With the implemented price hikes, the price gap within the market started to widen again. This situation developed as a result of the difference among factories' capacity useage and their raw materials stock levels. Due to the difference in raw material stock levels, some gauges saw a price increase of up to $50/mton, while other gauges only saw an increase of $5/mton.
The price increases implemented by private sector
galvanized producers, by securing the sale of materials in stock, helped distributors' businesses.
August 2004
The summer season in the American market, contrary to
Europe's, led to an increase in activity and price increases were seen for flat products.
This increase in prices caused an increase in export bookings to the US, particularly for Turkish private sector
galvanized steel producers y received. And this, inevitably, was the reason for an extension in domestic order deliveries and delivery periods were reported to have increased up to a minimum 2 weeks.
In the last export tender, with
Erdemir receiving the highest offers for the American market, talk began circulating that
Erdemir was going to increase its domestic market prices.
This expectation, encouraged Turkish private sector
galvanized steel producers to prepare their price lists. In this way, the expectation of price increases actually caused real price hikes in
galvanized steel products. The price increases ranged between $20-40 and were only imposed on products of certain widths.
On August 16,
Erdemir increased its
galvanized products base price by $20/mton up to $700/mton.
Due to the start of renewed activity following the European markets returning from summer holiday and local producers announcing price hikes one after another, an increase in imports was expected. The known strong course of the American market was especially likely to strengthen the probablility of Turkish private sector
galvanized steel producers falling into difficult times in regards to the supply of raw material. Materials, especially those with thickness
distribution toward both ends, such gauges as thin as 0.30mm and as thick as 2.00 mm and over, are experiencing difficulties.
Based on this reason, with the expectation of Erdemir's price hike at the beginning of the month, even though the hike turned out to be lower than expected, due to difficulties in raw material supply,
galvanized steel producers announced new price hikes.
As a result of the above mentioned strong course of export markets and
galvanized steel producers, who will likley now put more emphasis on exports, the lowering of 2-week domestic market deliveries does not look very possible.
In the following four graphs below, you can see the price changes in the course of 2004 for some example gauges and the general trend in the average prices belonging to these gauges.
Please click below to see the graphs:
TR 2004 0.50 mm HDG prices
TR 2004 1.00 mm HDG prices
TR 2004 2.00 mm HDG prices
TR 2004 HDG average prices
The last graph is based on a price average of the maximum and minimum market price levels indicated for 0.50, 1.00, and 2.00 mm
galvanized steel.