Turkish domestic rebar prices up by a fifth this week

Turkish rebar producers increased domestic offers on a lira-denominated basis by around 20pc from a week earlier after a dramatic depreciation of the lira against the US dollar.

This has created a huge dent in end-user demand at a time when demand was already weak after Turkey's central bank cut interest rates by 1 percentage point to 15pc on 18 November.

Istanbul rebar producers' offers stood at TL11,400-11,500/t ex-works including value-added tax (VAT) this morning, up from around TL9,500/t ex-works including VAT at the end of last week. Turkish rebar producers have only been willing to sacrifice a small amount of US dollar value of their offers owing to their inability to push their raw material import prices down by any significant extent.

Official offers stand at the equivalent of $750/t ex-works excluding VAT, but mills are willing to sell at around $740-745/t ex-works excluding VAT, equating to an average of around TL11,300/t ex-works. This is still around TL1,800/t higher than their targeted sales prices at the end of last week.

The sharpest degree of depreciation of the lira was seen this week, but the lira's weakening has been unrelenting since the middle of September. Turkish rebar producers' offer levels averaged TL6,650/t ex-works including VAT on 14 September, meaning that the cost of construction steel has increased by 72pc in just 10 weeks.

Many Turkish mills were unable to make offers on a lira-denominated basis yesterday because of the sheer volatility of the exchange rate. The exchange rate stood at TL11.20:$1 on the morning of 22 November, when rebar offers were made, but was at TL12.89:$1 this morning when rebar offers were made, having earlier hit TL13.07:$1. Even today some mills are only offering on a US dollar basis. An Iskenderun mill was seeking $735/t ex-works excluding VAT, and two Izmir mills offered $745/t ex-works excluding VAT.

"The competitive force of the exchange rate leads to an increase in investment, production and employment," Turkish president Recep Tayyip Erdogan said on 22 November. Abu Dhabi Crown Prince Sheikh Mohammed bin Zayed al-Nahyan, the de facto leader of the UAE's most powerful emirate, is in Turkey for talks as the Middle East country considers investing billions of dollars in Turkey. Other Middle East countries such as Jordan and Qatar are touted to invest in Turkey, but this would do little to help stabilise the exchange rate, steel market participants said.

By Alex Reynolds