Turkish mills to maintain run rates through spring

Some Turkish mills have confirmed they plan to keep crude steel production utilisation rates unchanged for at least the next six weeks as a result of rising rebar sales this year.

Most mills cut crude steel output by 20-35pc at the beginning of January in response to weak domestic and export rebar demand. Five mills confirmed this week that they plan to maintain these lower output rates throughout April, and in one case to the end of May.

A Marmara mill plans to keep utilisation rates at 61-62pc of capacity at two of its three operating furnaces through April. Any change to this will be based on the volume of billet and rebar sales it can secure. Many mills have increased billet production or even bought billet domestically since mid-February as a result of weak rebar demand.

At least one longs producer has increased its wire rod allocation since the beginning of January in response to stronger demand relative to rebar.

Turkish steelmakers produced 2.57mn t of crude steel in January, down by 19.5pc on the year and 11pc down on December.

Higher allocation of production towards billet and wire rod has offset some of the fall in crude steel production caused by the weak rebar market.

A second Marmara mill is operating for around 10 days a month and expects to run at these levels "for a while longer".

Of the 6mn t of rebar exported by Turkey in 2018, the mill expects around 2.5mn t will need to find a new market as a result of US section 232, the Canadian safeguard, the Australian ADF investigation and the latest Colombian safeguard. As mentioned above, some of this excess is being offset by a move towards billet and wire rod allocation.

The second Marmara mill also expects that the 10mn t of domestic rebar sales recorded in 2018 could be halved this year, although it admitted it is still uncertain how the rest of 2019 will play out. It said domestic rebar sales were down by 65pc on the year in January-February.

One mill has sold just 15,000t of rebar for April export shipment or domestic delivery so far, and 20,000t for May. This is around 25pc of its total production level, the mill said.

A third Marmara mill has been running five days in every seven since the beginning of January. Its rebar exports have risen in the past two weeks, which it attributes to the slow increase in Chinese prices, but its domestic sales are weaker than those of other Marmara mills. It might decide to switch its furnace off during the last week of March and the last week of April.

An Iskenderun mill increased its output from eight hours a day to 12 hours a day on 10 March, but plans to remain at 12 hours a day until the end of May. It hopes domestic rebar trade will improve in June, as does a Marmara mill.

A second Iskenderun mill is working five of every seven days and will decide after local elections on 31 March whether to change this in light of any demand shifts.

Some Turkish traders are sceptical as to whether Turkish mills will maintain lower production levels for several months, saying lower output will only increase unit costs.

But rebar sales volumes continue to be a far bigger problem for mills than scrap purchase-rebar sales price margins, which mills have been largely able to balance at a spread of $170/t since mid-February.

This means mills will struggle to increase crude steel production levels if sales volumes do not improve in the near-term, regardless of whether there is any fall in the imported scrap price that could improve margins on steel sales.