Expanding steelmaking capacities in Malaysia and Indonesia, led by Eastern Steel and Dexin Steel, this year will most likely reshape the Turkish import market going forward.
China last year was Turkey's chief supplier of flat products, with volumes increasing as a result of the outbreak of the war in Ukraine in 2021 and as Chinese exports rose amid sluggish domestic demand. China could continue being a key source for Turkish buyers, but its share of the country's import market may be affected by new sellers.
Towards the end of this year, Malaysia's Eastern Steel will bring on line 3.5mn t/yr of flats. The steelmaker aims to export about 2.2mn t/yr of hot-rolled coil (HRC) to foreign countries, with Turkey being a key market, according to a company source.
Malaysia already benefits from a free trade agreement (FTA) with Turkey that makes steel product imports exempt from the 13-15pc customs duty.
Similarly, Indonesia is in the process of finalising its own FTA with Turkey, with talks still ongoing. This makes Indonesian steelmaker Dexin Steel's project to open a new flat steel mill towards the end of this summer, with a rolling 4mn t/yr stainless and carbon flat products capacity, another potential duty-free source for Turkish buyers.
The prospect of anti-dumping duties being introduced this year on Chinese, Indian, Russian and Japanese HRC also could help usher in greater interest and consumption of flat products from alternative suppliers.
But the majority of buyers in Turkey operate with inward processing regime licences when purchasing imported HRC, which exempts them from any form of import duty, but with the caveat that they cannot use the material for domestic market consumption. If anti-dumping duties were to be introduced, Malaysian and possibly Indonesian coil could join Egyptian as sources for raw material for domestic market consumption. Egyptian HRC trades at a price premium to Chinese and other origins, subject to customs duties, which could imply a similar differential for Malaysia and Indonesia.
"Malaysia will be key for Turkey's steel supply chain going forward," a market participant said. A buyer that is active in the export market expressed its willingness to buy from Malaysia on a monthly basis once their capacities come on line.
Turkey last year imported 150,000t of flat products from Asean countries, with 98,000t of this having come from Indonesia and the remaining 52,000t from Vietnam. Activity from the Asean region into Turkey could increase, supported by Malaysia, while Indonesia's role will depend on the outcome of FTA talks.
It is interesting to note that Eastern Steel and Dexin Steel are joint venture projects by Chinese steelmakers aiming to expand capacities in foreign markets. This growing trend is underpinned by myriad trade restrictions across international markets on Chinese producers. Eastern Steel is partly owned by Beijing Jianlong Heavy Industry Group, while Dexin Steel is under the control of Shanghai Delong Iron and Steel Group.
