While the Turkish steel markets seem silent in general, in reality a storm is gathering behind this apparent silence. A lot of white goods producers (which consume galvanized and cold rolled materials) and sellers are grumbling about the taxes on flat steels. As is known, the local market has been suffering from a lack of materials due to the influence of the import taxes on flat steels. This shortage has created some problems for white goods producers, from whom demand has been lively. They have had to buy materials from the local market at high price levels as they have been unable to buy sufficient quantities of material from Turkish integrated flats producer Erdemir. For this reason, they have informed the Turkish government that they want the taxes in question to be removed. However, with steel demand at very low levels in other sectors and also given the low supply levels and low volume of imports, prices in the local market have been prevented from declining. Furthermore, Erdemir has filled most of its order books for October production. Thus, while the problem of material shortage may not come to an end, it is nevertheless expected to be relieved somewhat in the near future as local steelmaker Isdemir has increased its production capacity and as Erdemir has reduced its export volume.
Meanwhile, how will the abovementioned increase in production capacities affect prices? Principally, it is anticipated that price levels in Turkey will maintain their levels for two-to-three months as Erdemir has already sold its October production materials and also due to the low volume of imports. Prices may even register an uptrend on the back of cost pressure and the liveliness of the foreign markets in general. Indeed, the currently active Asian markets have pushed up raw material prices moderately. General steel demand from China and India in particular has increased lately compared to the same period of last year. These developments seem to have caused scrap prices to climb to around $310/mt in general. From early September, it seems that demand will likely register a certain degree of recovery with Europe's return from holidays and as the steel consuming sectors resume production. In short, all the indications are that September will be an active month for the steel markets.
Many furnaces will start producing again in September both in Europe and the CIS. With this development, supply will certainly increase in mid-October and after. It is hard to say if the anticipated rise in demand will balance this increased supply. For this reason, a lot of firms are adopting a very cautious approach to the post-October period. Most players are almost fully sure that price levels will maintain their strength for two months (i.e. September and October); however, it is not yet clear what will happen after this period.
It must be remembered that raw material prices will likely register an uptrend with the increased demand caused by the resumption of production in September. This situation will certainly affect production costs. Most raw material price increases result from the material needs of these furnaces. Again, all indications are that prices will likely be at strong levels for one or two months more. However, as regards demand, it is widely thought that it will increase gradually, excepting Asia. This means no sharp increase in demand is anticipated. It is expected that price levels will swell as material will be transacted among traders, not among end-users, just like early 2008. For this reason, it will be more advisable than ever to monitor end-user demand so as to understand if the price uptrend will be a healthy one. Currently, no demand boom is seen except in Asia. However, as long as prices keep moving up, stock levels may rise as some traders build up stocks in order to make a profit later. If this happens, artificial price increases may be seen which would result in further over-stocking. Regarding the current situation, the old financial confidence has not been restored one hundred percent; however, a positive mood is being observed most sectors. With this positive mood being reflected more rapidly in countries like China and India, it is certain that the effects on other countries and regions seriously hit by the crisis will be seen gradually and will become more obvious in 2010. Thus, it may be said that if there is any sharp increase in steel prices (flats in this case) in the near future, these movements will not be healthy. For this reason, in conclusion, at the present time market players need to move with deliberation and great caution.