Abstract
BMI’s latest Turkey Metals Report forecasts a sharp but short
contraction in Turkish steel output, with
signs of a tentative recovery in
prices from Q309 signalling a turnaround.
In the first four months of
2009, Turkish crude steel output was down 18.8% year-on-year (y-o-y) to
7.45mn tonnes. However, there are strong signs that the industry is turning
the corner, with April output
down 13.2% y-o-y but up 8.2% month-on-month
(m-o-m) to 1.98mn tonnes. This apparent recovery from
February’s low
of 1.7mn tonnes was stimulated by rising demand for longs ahead of the
mid-year
construction season as well as restocking, and an overall rise in
industrial output. Significant steel price
increases are expected in Q409,
when the recovery begins to really pick up. BMI forecasts a modest rise
in
demand in June-July, a slight fall in July-August and accelerating from
September.
With the Turkish economy in recession and BMI forecasting a
5.7% contraction in GDP in 2009, the steel
industry is set to suffer a
sharp decline in output. BMI anticipates a 17% fall in crude steel output
to
22.28mn tonnes in 2009, the lowest level since 2005. The decline in
output will be sharp, but BMI
expects it will be short-lived and that
Turkey will retain its long-term position as one of the world’s
largest steel exporting nations.
Arab countries have been crucial to
sustaining Turkish output, with exports to these markets up by 45%
y-o-y
to 4.2mn tonnes in the first four months of the year. As a result, Arab
markets consumed at least
half Turkish steel output, compared with around
a third in the same period of 2008. The Egyptian market
is the largest
importer of Turkey’s steel products, consuming 1.7mn tonnes of Turkish
steel in the
January-April period compared to 58,000 tonnes in the same
period of 2008. As a result, Egypt overtook
the UAE as Turkey’s
largest market. The UAE’s imports during the period declined by
two-thirds to
553,000 tonnes as its construction and real estate sectors
ground to a halt.
BMI forecasts a fall in exports of nearly 11% in 2009 to
16.3mn tonnes. We expect exports to recover in
2010 with a rise of 7% to
17.45mn tonnes. By 2013, exports should total 27.82mn tonnes, an increase
of
52% over 2008 levels. A major risk factor for the Turkish metals
industry is the excessively volatile
exchange rate, which is making it
hard for producers to plan costs. Fundamental pressures over the longer
term are expected to remain firmly weighted towards weak lira performance.
Turkey is also dependent on
coal imports for two-thirds of national
consumption. The competitiveness of the steel and aluminium
industry
therefore depends on the effectiveness of efforts to stabilise the exchange
rate.
In terms of imports, the government’s move towards trade
protectionism means that cheaper products
from Asia are less attractive on
the Turkish market. The effect of increased import duties on steel
products from January was immediate, with new import transactions grinding to
a halt as the Turkish
market sought domestic sources. As a result of the
increase in duties, BMI forecasts a decline of over
30% in steel imports
to 9.07mn tonnes, the lowest level since 2004. However, a strong recovery
is
anticipated from 2010, when imports are expected to grow 13% to 10.2mn
tonnes. By 2013, Turkish
imports should total 15.8mn tonnes in volume and
US$15.4bn in value. The steel trade surplus should be
around US$8.56bn, up
from US$3.2bn in 2008.
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