Turkish hot rolled coil exporters' attempts to gauge sales by reducing prices early last week have borne fruit with several large sales to Asia last week, Kallanish understands from market participants.
Reductions of around $10/tonne for late May/early-June-loading material last week to around $510-520/t fob Turkey have started up negotiations. Sales were concluded at still lower levels, equivalent to around $505-510/t fob, to Asian destinations, traders say. As anticipated, Turkish mills' pricing and loading dates agility add a competitive edge in direct negotiations with buyers, as producers are prepared to move bookings forward for large tonnages, Kallanish hears.
But European sales are still muted, with competition from domestic European producers pricing Turkish suppliers out. An Italian producer is now offering at an equivalent of €465/t cfr ($526) European ports, which is at least $10/t below workable Turkish HRC export prices. But this could be overcome in the following weeks, considering some traders' reports of Turkish mills' readiness to sell at $500/t fob.
In northern Europe, Turkish HRC remains challenged by a major Russian producer, whose offers have also come down, from $500/t fob St. Petersburg a week prior, to $495/t fob last week. There are indications there is still room to move down to achieve sales, traders note. For northern Spain, the same seller indicates €472-475/t cfr.
Despite Turkish mills' willingness to reduce prices to compete, their cash cost of production floor, estimated at around $490/t fob, is looming large. At the point prices go below cost level, mills are likely to slow output, resulting in a reduction in offer volumes. Coupled with the reduction of margins and stocks in China, some traders opine this has the potential to provide a floor to the descending market sentiment. It could prompt a new wave of restocking and subsequent price increases around late July-August.