Turkish slab consumption soars on favorable flat steel market

Favorable conditions in both the domestic and export markets for finished flat steel products pushed Turkey’s apparent consumption of steel slab up by 20% year on year in 2017.

Slab consumption totaled 14.08 million tonnes in 2017, of which 11.68 million tonnes was produced by local mills, up by 15.15% year-on-year, according to the Turkish Steel Producers’ Association (TÇÜD).

Meanwhile, slab import volumes soared by 50% year-on-year to 2.4 million tonnes, according to data provided by market participants.

The CIS region was the principal source of slabs for Turkish re-rollers last year, with the supply of semi-finished product almost doubling year-on-year to 1.2 million tonnes.

It was followed by Brazil, which increased its slab shipments to the Middle Eastern country by around 30% over the year to 860,000 tonnes.

Metal Bulletin’s assessment of export prices for CIS slab was $580-585 per tonne fob Black Sea on Monday March 19.

The assessment of Brazil’s export slab price reached $580-590 per tonne fob on March 16.

Domestic finished steel consumption, exports thriving
The higher slab consumption in Turkey was driven by strong fundamentals in the domestic and export finished flat steel markets – particularly, improved demand and prices.

Turkey’s flat steel consumption totaled 17.7 million tonnes in 2017, up by 5.7 % year-on-year, according to the TÇÜD. Of this total, around 12.3 million tonnes was hot-rolled coil (HRC), up by around 12% against the 2016 figure, according to national data provider Steel Data.

Metal Bulletin’s weekly price assessment for Turkish domestic HRC was $665-670 per tonne ex-works on March 16.

The price assessment averaged $547.43 per tonne ex-works in 2017, against $446.46 per tonne ex-works in 2016.

A surge in finished flat steel export volumes and prices was another reason for higher slab consumption in Turkey, notably imported material.

The country imposes a 22.4% import duty on steel slab and billet, but companies which export their end-products are exempt from this under Turkey’s inward-processing regime.

Turkey exported 4.18 million tonnes of flat steel products in 2017, an increase of 40.22% compared with 2016’s 2.98 million tonnes, according to the Turkish Statistical Institute (TUIK).

This was mainly due to increased demand in Europe created by the introduction of fixed charges in the range of €17.60-96.50 ($22-119) per tonne as a trade defense measure against HRC originating from Brazil, Iran, Russia and Ukraine in October 2017.

In April 2017, the European Commission (EC) also imposed definitive anti-dumping duties on HRC imported from China at rates of 18.10-35.90%.

Shipment volumes of Turkish HRC to Europe rose by 85% year-on-year in 2017, to 1.89 million tonnes.

Under these market conditions, Turkish re-rollers increased their import slab purchases despite the fact that the rise in slab prices was higher than the HRC price rise.

Metal Bulletin’s average price assessment for Turkish HRC exports was $534.29 per tonne fob in 2017, up by $92.17 against $442.12 per tonne fob in 2016.

Meanwhile, the average price assessment for CIS export slab was $439.47 per tonne fob Black Sea in 2017, up by $114.03 per tonne compared with $325.44 per tonne fob Black Sea in 2017.

This was due to the reduced availability of slab in the global spot market because demand for the product increased in all the consuming markets, from the United States to Southeast Asia.

Turkey’s consumption and exports of flat steel are both expected to continue to grow in 2018 amid strong local demand, Gökhan Demiruz, chairman of Turkey’s Flat Steel Importers, Exporters & Industrialists Association (Yisad), said in January this year.

He also cited the launches of new flat steel rolling capacities by Yildizlar Holding and Erdemir as a favorable factor for the development of the Turkish steel market.

This in its turn is expected to have a positive effect on slab consumption, although whether the growing needs will be covered by local or imported material will depend on a number of factors.

One of the most important of these will be the effect of the 25% blanket tariff on steel imports signed off by the US president in early March, in response to the country’s Section 232 investigation into imports that may threaten national security, a local steelmaker told Metal Bulletin.

The US is one of the principal outlets for Turkish long steel products, and the reduction of shipments to that destination could result in lower long steel production in Turkey and consequently decreased demand for steel billet.

Most Turkish steelmakers have convertible capacities and can switch between slab and billet production depending on the market situation. Lower demand for billet in the country would lead to higher slab production domestically, and consequently to a reduction in slab imports.