Turkey needs cheaper offers to sell into Asean

A Chinese rebar deal concluded today into south-east Asia at $480/t fob, on a theoretical weight basis, indicates that Turkish mills would need to reduce their offers by at least $15/t to attract south-east Asian business.

Turkish mills have already reduced export offers to levels that jeopardise their profitability, particularly if usual seasonality supports scrap pricing. Mills have been offering at $485/t fob Turkey, on an actual weight basis, without attracting business.

Three Turkish sellers have already accepted that they have lost substantial business into Asean this winter because of China's re-emergence as a competitive exporter. But others may choose to be more aggressive to secure sales, especially if demand from other important markets, such as Europe, does not return before the end of this year. Such a strategy is unlikely until the mills have more clarity over scrap import costs for January shipment.

Today's deals at $480/t fob China on a theoretical weight basis equate to around $496/t fob China on an actual weight basis, and $510/t cfr south-east Asia on an actual weight basis.

Freight rates from Turkey to south-east Asia are down slightly this month compared to when Turkish mills conducted business with south-east Asian importers in August and September, with rates now at $30-35/t to Singapore. Considering the difference in cfr prices, the lead times and the trajectory of market prices, Turkey would need to consider selling into south-east Asia below the $470-475/t fob Turkey range, on an actual weight basis, to do business. This is also based on there being no further falls in Chinese export/domestic prices, at a time when sentiment towards the world's largest steel producer and consumer is tepid as the trade war with the US threatens to eat further into economic activity: Chinese merchandise exports to the US are growing at around 5pc on a year-on-year basis, down from 12.5pc in January, as tariffs bite into overall exports, according to the OECD.