fAccording to interviews carried out in the past week with a number of flats trading firms in the local Turkish market, difficulties in collecting payments seem to be a common problem in the sector. A lot of firms are not able to purchase new material since they have been unable to collect money for previously sold materials. The resulting "domino effect" has been slowing down the market a good bit. As a lot of firms (those that have failed to collect money owed) are now hesitating to sell with deferred payment, they now also do not want to sell materials if they do not know the buyer well. This is having a locking effect on the sector. One positive development is the activity (though small) that has started to be observed in business with the coming of the New Year. It is observed that the exporting sectors in particular have started to buy material as they gradually shape their plans for 2009. As is widely known, due to the additional duty implemented last week on imported flats products in Turkey, a small degree of price increase has been observed in the country. Despite this movement, the recovery in demand is still slower as compared to the same period last year.
Although there are diverse opinions as to what will happen in the upcoming days in the global flats market, looking at the foreign markets, it is observed that there is a recovery (though of small dimensions) in the Far East, particularly in China. Ex-China HRC offers are currently at price levels of $550-560/mt FOB. In any case, in almost all economic analyses China is being touted as the first country that will emerge from the economic crisis. With its US$2.7 trillion in reserves in its central bank and its strong financial structure, the Chinese economy (following stringent policies) will overcome the global downturn through investing in its local market. In order to satisfy the steel demand that will created by the investments in question, China will purchase steel, not only from its own sources, but from neighboring countries as well. In particular, it is expected that the investments will gain momentum after the Chinese New Year. Everybody hopes that this optimistic mood will spread to the rest of the world as well.
Another important point, besides the developments mentioned above, is the increase in oil prices due to the following reasons: the tightening of oil supply from OPEC countries, the increase in natural gas prices and Israel's attacks on Gaza. Oil prices have increased to the level of $48/mt as of today, while prices had declined to $32/mt in December. This price increase will certainly affect the commodity markets to a certain degree. All these developments can be seen to be pointing towards a way out of the current global sluggishness. However, the important issue is the length of time that any recovery will require. Although there are lots of different views on this question, the fact is that all the world's biggest economies have taken measures to overcome the downturn. Such measures include: reduction of interest rates, stimulus packages and assistance to firms facing bankruptcy. The USA has a key role. Expectations of the new president are high. While significant steps are expected in this country, thanks to new tax reductions US citizens also already seen to be spending more.
In the Turkish domestic flats market, imported standard quality HRC is being offered at $480-500/mt excluding VAT, whereas Erdemir production standard quality HRC is being offered at $520-540/mt excluding VAT. Additionally, Erdemir production 16-50 mm plates are being offered at the price levels of $780-820/mt excluding VAT. All prices have this week increased by $30-40/mt compared to last week. When the tightening of the cash flow in the domestic market gains some relief and investments begin to gather speed, the effects of the crisis will be overcome easily enough. Flats prices are seen to have registered an upward trend this week. The important point is whether this increase will be sufficient to stir up demand. However, no change in the demand trend has yet been observed; tired of incurring losses, all market players would like to be able to sell at least at their production cost levels.