Dr.Veysel Yayan,the Secretary General of Turkish Iron and Steel Producers Association has shared his views regarding the steel industry and the price trends in the market locally and globally.
The high performance of Turkish steel industry in terms of production growth in the last ten years indicates a 21.3 percent production growth in the first half of 2011.Thus Turkey recorded the biggest production increase among the fifteen biggest steel producing countries worldwide.
However,despite the rapid growth of steel production in Turkey,reports in early July appeared in the press claiming"some producers were cutting production that cause price increases,"raised concerns in the industry.When we look at the numbers,we clearly see that the steel production continues to grow in line with demand on the contrary to such claims.When we examine in depth,we see several reasons for the tight supply situation in the domestic market.One of them is the accelerating delayed investments after the elections that started to create demand.Also the Gulf countries sped up purchasing activities for their inventory replenishment prior to the Ramadan that coincides with the high season for construction.In addition to these factors,the fact that steel producers opted to book material for exports by the time the demand in the domestic market was weak also contributed to this situation.As the steel production capacity of Turkey allows room for increasing the production levels according to demand situation,it can be expected that this tight supply situation will rapidly get back into balance.
Actually,the steel prices in Turkish market are following a compatible trend with that of the international markets,and it is not possible to follow an independent trend due to the integrated structure of the global steel markets.World steel prices follow a generally parallel trend due to factors such as the structure of production,consumption and cost,raw material sources and the closeness to the major markets.The consistency between the domestic price levels and the export price levels of Turkey clearly sets this situation forth.
As it is the case with all trade commodities,the product prices in the iron and steel industry are also impacted by the input costs and supply-demand balance.Raw material and steel product prices are mostly formed on the basis of US dollars worldwide,and when Turkish lira loses value against the US dollar,US dollar based prices appear as if increased in the domestic market even though they still maintain consistent with the international prices.
Although the price increase seen in the last one year period has been observed more or less in all regions such as Europe,US,Asia and Africa,the effect of the increase is felt stronger in countries such as Turkey,where the domestic currency depreciate against the US dollar.
On the other hand,when we look at the international rebar price level at$1500 back in July 2008 and trace it falling down to$400 in a period of time as short as till October,losing more than 70%of value,we can clearly see that the price movements in the steel industry cannot be interpreted by only looking at the domestic inflation rates and exchange rates and that there are a lot more factors to be taken into account in this respect.
In the rebar market,where more than twenty five steel mills and more than hundred rolling mills producing rebar ad where there are no import restrictions,the free market mechanism is working in all aspects.The decision by the Competition Authority regarding the investigation they executed in the domestic market between the dates June 16-July 14 2011 as a result of the complaints on rebar prices rises recorded in the recent months is also confirming this situation.
The Competition Authority has concluded that;
The price increases of rebar did not occur as a result of an agreement and/or a coordination among the enterprises
The price levels executed by the enterprises under investigation were mainly parallel to the international price levels
No major inventory building or inexplicable production cut in the subject enterprises have been found and dropped the case.
The severe competition in our steel industry is allowing opportunities to industry enterprises to improve their competitive powers in the international markets.The sub contractors that comment on the steel price increases would better keep in view of the competitive structure of the industry in order to maintain a neutral evaluation of the situation.
