A slight improvement in activity levels has been observed in the Turkish flats market as compared to last month. However, the important question is whether this activity will be sustained. It is still too early to talk about a change in the market situation or to say that the market is showing signs of recovery. Further time is required to observe developments.
Most flat products needed in the local Turkish market are being supplied by Erdemir for the time being. Standard quality HRC, which is generally the most widely-used material, is now registering greater demand levels in the market. While Russian producers are increasing their offer prices to Turkey in particular, Ukraine producers are pushing down their levels.
Thus, Erdemir production material is currently being sold in a lot of regions in Turkey thanks to the import duty and also to Erdemir's price advantage compared to the import material. However, demand is still at low levels. According to a lot of firms, the situation will change in a positive direction in the last quarter of this year. Thus, the question is - who will survive until then? According to market players, companies with good capital availability, with structured debts and with good communication channels will make it through.
Meanwhile, to answer the question whether prices will go down further, a further decrease seems unlikely for now. Considering iron ore prices and production costs, it may be said that prices have already hit bottom. In these days when CIS origin slab is being offered to Turkey at $300/mt FOB, it can be said that local flats prices in Turkey are at their lowest possible levels. If prices fall a bit further, plants like Erdemir, who are located far from iron ore sources, will be in a very difficult situation.
Thanks to the falling prices of automotive and white goods, a slight improvement in demand for flat materials is expected in the near future. As mentioned in our previous analysis, the crucial factor is the balance between supply and demand. If all producers increase their outputs due to the recovery of demand, overall sharp price decreases may be observed. Thus, it is not incorrect to say that the prices are at their bottom levels at current capacities. However, the outcome of the iron ore and coking coal negotiations in the upcoming days and the levels of the new contract prices will be decisive. If there no sharp decline in the contract prices, an uptrend in flats prices may be expected in line with rising demand.
Looking at the imported flats market in Turkey, we see that HRC from Ukraine is being offered at $345-350/mt CFR for May production. However, Ilyich has increased its new production HRC prices from the previous $320/mt FOB to $340/mt FOB. The new prices are expected to gain greater definition as of Tuesday, April 21, following the conclusion of the Orthodox Easter holidays.
Meanwhile, Russian HRC offers to Turkey are at $395-405/mt CFR for May production, while the same origin CRC offers are at $450-490/mt CFR. It is also heard that traders are offering Egyptian origin HRC for May production at $430-440/mt CFR Turkey, whereas the EZDK production HRC base price is at around $400/mt FOB.
On the plate side, Donetsk's plate price is at $380/mt FOB, whereas Ilyich's price is at below $500/mt FOB. However, it is mentioned that new production material from Ilyich stands at $490/mt FOB, it is also mentioned among market players that it is possible buy plate below $475/mt FOB. Due to the global tightening of demand, producers are considering firm bids rather than giving offers. Additionally, just like for ready stock material, offers at more acceptable prices are being heard for commercial grade plate and shipbuilding plate due to order cancellations.
In the Turkish domestic HDG market, 0.30 mm 100gr/m² material is at $700-750/mt + VAT ex-works, 0.50 mm 100gr/m² is at $640-680/mt + VAT ex-works, 1.00 mm 100gr/m² is at $620-650/mt + VAT ex-works and 2.00 mm 100gr/m² is at $580-610/mt + VAT ex-works. More attractive prices compared to the above may be found from stockists. Currently, HDG demand is better than demand for CRC products in the Turkish domestic market. Meanwhile, HDG imports have registered a contraction just like for other flat products in Turkey. There are still some HDG deals concluded from Romania and Egypt, mostly due to the absence of import duty for these countries. Additionally, there are some deals from Europe for second quality HDG.
Considering the import flat product prices and the import duties, Erdemir's prices seem very attractive given their quality, with Erdemir production 2 mm HRC being offered at $420/mt ex-works, and CRC being offered at $480/mt ex-works. However, it is mentioned that there are some deals at lower prices for large tonnages. Thus, import products have been replaced by Erdemir production materials in many regions in Turkey. However, since different materials from different origins are a requirement for stocks, some offers at acceptable prices from Russia for CRC have been heard; also, there are some offers from Europe for HRC to big buyers in the local Turkish market; and it is heard that some deals are being concluded.