Posted on 13 Feb 2023
Market participants are looking to see a response from the Turkish government to the earthquakes that hit southeast Turkey on 6 February, to evaluate the impact of the events on the steel market.
The disaster occurred at a critical time for the country, with the general elections set to be held in May or June this year, which means that the government is likely to be taking decisions, based on what will be viewed more favourably by the public, as it works to rebuild following the damage in the affected regions.
On one hand, market participants said that the government might look to limit exports of steel, especially of products used for construction and infrastructure, to ensure it has materials on hand, as it restarts rebuilding and repair projects. This could have a cooling-off effect on domestic steel prices, although that would also depend on the extent of the damages and the demand it generates for steel. Not much material has been destined for exports over the past year, which has kept production low, so Turkish mills do have the ability to lift supply in the face of higher demand.
On the other hand, market participants said that the government might look to boost steel and general exports to generate income and foreign currency to fund the repairs projects. This could result in some incentives introduced that would make Turkish producers more competitive in export markets.
If producers did start to export more, this could also require the removal or lowering of import duties so that Turkey has access to lower-priced material from abroad for domestic consumption. The tariffs were increased on 27 January, with no notice, as is often the case with political decisions in the country.
A middle-ground decision would be another scenario, where export incentives are introduced for certain steel products, whose supply is not critical for the reconstruction works, and funds are raised through exporting those, whereas exports of key materials are limited to ensure enough domestic supply at lower prices.
Source:Argus Media
