Turkish exports of flat products fell by almost one-third to 410,000 tonnes in first quarter of 2012 against the corresponding period last year, according to newly published data from Istanbul Minerals & Metals Exporters Assn (IMMIB).
Turkish flat-steel producers acknowledge they cannot compete with Russian and Ukrainian imports on price, despite their advantage in terms of delivery and tax costs.
“We cannot compete effectively with CIS suppliers in the export market yet, because we are not able to reduce our production costs as low as Russia or Ukraine,” an export manager with a Turkish steelmaker told Metal Bulletin on Thursday April 26.
“Russian and Ukrainian steelmakers produce steel from locally mined iron ore, while both types of our plants [blast and electric arc furnaces] depend on imported iron ore or scrap, which naturally results in higher costs for us,” the export manager said.
“[Russia and Ukraine] also have huge reservoirs of oil and gas, while we import almost all of our requirements,” he added.
Turkey’s flats industry is still in its infancy, building on the swift development of mills such as Erdemir since the start of the global financial crisis in 2008.
Its development compares with the more mature long-steel sector, whose products such as rebar were particularly competitive in the Gulf Co-operation Council nations until the property bubble began to collapse in some parts of the UAE.
Despite import duty of around 9% imposed on Russian products entering Turkey, a healthy flow of material is still apparent, importers say.
The market development manager of a trading company added that output from Russian or Ukrainian mills can be 5-6 million tpy, while the highest output so far achieved by a single plant in Turkey is just 3 million tpy.
“Production scale is another factor which can affect production costs,” the manager said.
“We have five suppliers of flat products in Turkey – Erdemir, Isdemir, MMK, Colakoglu and Toscelik – of which [the latter] three plants have only come on stream recently. Naturally, their production costs are higher than those of their competitors, which have long histories,” he explained.
An Iranian flat products trader told Metal Bulletin that Iranian traders usually import hot rolled coil (HRC) from Russia through the Caspian Sea at around $50 per tonne cheaper than similar material from Turkey.
“We check Turkish prices now and then,” the trader said. “We had an offer for HRC at $700 per tonne cfr for delivery into Iran’s northern port. Turkish suppliers cannot offer the same material for less than $750 per tonne.”
The cost of sea freight is also a key factor for Turkish producers, the trader added.
“There is a sea-freight rate of just $20-30 per tonne for shipment of material from the Russian port of Astrakhan on the north of the Caspian Sea to Iranian ports on the south. But the rate is $50 per tonne or more for shipment of material from Turkey to Iranian ports in the southern Persian Gulf,” he said.
Long steel exports
Although Turkey’s flat-steel exports fell year-on-year in the first quarter of 2012, the country’s long-steel exports rose by 26.1% to 3.2 million tonnes.
Rebar exports leapt by 30.1% to 2.4 million tonnes, profiles increased by 15.8% to 461,000 tonnes, and wire rod exports increased by 16.9% to 293,000 tonnes, although semi-finished product exports fell by 12.4% to 497,000 tonnes.
Overall, Turkish steel exports have grown. IMMIB figures show the sum of semis, longs and flats reached 5 million tonnes, up by more than 10%, with a value of $4.3 million, up by 11%, in this year’s first quarter.