Turkish steelmakers prepare rebar price adjustment

Several Turkish rebar producers are on course to lower export and domestic rebar price target levels on a US dollar-basis, in line with weaker demand in both markets.

Strong restocking levels in Turkey's domestic rebar market since the first week of September have begun to peter out this week. Seasonal restocking, low availability for the local market and a weakening lira against the US dollar culminated in strong demand over that period, but lira-denominated prices have risen above market expectations at a time when many traders and end-users are well stocked. The lira's recovery against the US dollar this week has also capped further purchasing, given the lower lira-denominated offers that will potentially emerge from steelmakers.

The US dollar-equivalent level of purchases from Turkish steel mills increased by 13.1pc on 2 September-21 October from $663.20/t ex-works to $750.40/t ex-works but the Argus weekly Turkish domestic steel rebar assessment increased by 28.8pc from 6,480 Turkish lira/t ex-works including VAT to TL8,350/t ex-works including VAT. A net weaker lira against the US dollar since 21 October means that the percentage increase is even higher, as $750/t ex-works offers today translate to around TL8,410/t ex-works.

It is unclear how much of the US dollar-value of domestic rebar offers Turkish mills will sacrifice over the coming days, with much depending on the extent of the downward price correction they can achieve in scrap import prices and how much more export demand emerges in November, and price levels. Turkish rebar producers have stated that currently only a $10-20/t downward price correction can be anticipated on export and domestic sales for November, with lengthy order books helping to support prices somewhat and limited availability for prompt deliveries persisting. It may also be the case that Turkish mills do not make any downward price correction for another week or two as local and export sales have been active up until Monday this week.

Export rebar demand for Turkish product has not been active for as long as domestic rebar demand but many overseas markets have been catching up over the past month, after three months of inactivity in the summer. Overseas demand also appears to be petering out after the restocking by many export destinations in October. More Turkish rebar export deals were heard to Israel, Yemen, the US and Canada during October compared to September and August combined. But in the past week Turkish mills have stated that it is only the Americas demand that they foresee holding up their own offer prices somewhat in November.

A sizeable change in Chinese domestic steel prices since Wednesday last week has also put overseas rebar demand on hold. Shanghai domestic rebar prices almost reached their May peak levels on 11 October at 5,950 yuan/t ($930/t) ex-works, and prices have fallen sharply over the past seven days by Yn500/t to Yn5,200/t ex-works today. When Chinese domestic rebar prices peaked in May after government intervention to stop rising prices, the lag between Chinese domestic rebar prices falling and Turkish export rebar prices falling was around two weeks. A similar time lag may occur on this occasion and see Turkish export rebar prices begin to fall in the coming days after the Chinese government's intervention to stop coal prices from increasing further over a week ago, which has further pressured regional steel prices.

By Alex Reynolds