What’s behind the decrease in the Turkish flat steel market?

With regard to demand in Turkey's flats markets, in the past week no change has been observed compared to the previous week. It may even be said that trading activities are very slow. Buyers in the market are not likely to make purchases due to the uncertain environment and the weak demand. Indeed, successive sales campaigns and price reductions have not helped to inspire any market recovery. However, it is very easy to answer the question why current demand is so weak:

Firstly, Turkey is an exporting country: it earns most of its national income from exports and supports its cash flow in this way. Looking at the country's industries that require flat steel supplies, the automotive, pipe, white goods, panel radiator and construction sectors are the most important. It will be useful to take a look at each of these sectors in turn;

Automotive: This sector generally exports to Europe. With the economic contraction seen in Europe and the financial crisis in both the USA and EU, consumer confidence has taken a knock and Europeans are not now inclined to spend the money they have in their pockets. Thus, Turkey's automotive sector has also undergone a shrinkage. Meanwhile, it is known that almost all factories producing in Turkey have cut back on their production numbers.

Pipe: This sector carries out 80-90 percent of its export activity to the European and Middle East markets. Just as in the automotive sector, Turkey's pipe sector has begun to suffer due to the economic downturn seen in the EU, which has resulted in the suspension of projects and reduced demand. It is also known that many pipe producers have decreased their production numbers. In the pipe sector, which typically moves directly in parallel with the flats sector, the overall situation is such that pipe and profile prices currently stand below the level of sheet prices, given the background of the slackness seen in the domestic pipe market and the lower demand observed in the export markets for pipe.

White Goods: The white goods sector, which moves in parallel with consumer trends, is one of the sectors that feels most sharply the effects of an economic downturn. In the current situation, this sector showed the signs of contraction far earlier than all the other sectors, as white goods is one of the first areas where people delay their purchases.

Construction: This sector showed the first effects of the economic contraction seen in the domestic market. Due to the buoyancy in the construction sector in the overseas markets, the domestic construction sector in Turkey had been overlooking the signals emitted given by the sluggish domestic market since the beginning of the current year. However, more recently, with the slackness seen in the overseas markets, it has no longer been possible to ignore the sluggishness in the domestic market. Turkey's flats requirements for the construction sector are generally supplied from the domestic market. Exports of flat materials produced for roofs, facades and steel construction are significantly low. Therefore, the low demand seen in the domestic market has a direct effect on the construction sector.

Panel radiator: This sector is bound up with the construction sector, and thus directly feels the effects of the shrinkage in the construction sector. The slackness seen in housing sales and the gloom in the overseas markets has a negative knock-on effect on the panel radiator sector.

As seen above, common difficulties are seen with demand is at reduced levels in all the sectors in question. In addition, with the commencement of Ramadan, the markets of Muslim countries have come to a standstill and so Turkey's requirements of flat steel has shown a further decline. With regard to the global markets, the situation is the same. Currently, a general contraction is seen in economies worldwide. The best example of this contraction is the announcement by ArcelorMittal that it intends to reduce its production by 15 percent in the last quarter. In fact the solution to the current difficulties is very simple. The US economy still forms 30 percent of the global economy; to overcome the current downturn, the financial difficulties in the US market should be removed, confidence should be restored, hot money should be brought back into the markets and investments should be boosted again.

Looking at the current situation in Turkey's domestic flats market, the price levels according to the various regions are as follows: