Posted on 28 Feb 2022
Turkish and European re-rollers are likely to struggle to find slabs and hot-rolled coil (HRC) availability to replace any pending orders from Black Sea, should these not be shipped.
Market participants expect exports from the conflict zones to be affected for months to come, which will probably place significant upward pressure on flats prices in Turkey and Europe. Turkish mills are mostly offering for May and even June deliveries, whereas buyers will be expecting deliveries of CIS coils over March and April, which they may potentially need to find replacement for. In turn, gaps in HRC supply could result in a shortage of coated coils and pipes from Turkey, a Turkish pipemaker said.
Steelmaker Metinvest has already suspended production at some of its plants, and market participants expect Turkish and European re-rollers to announce force majeure, which will have significant implications for re-rollers and pipe manufacturers, many of which have lengthy order books themselves.
In addition, a large Russian steelmaker has warned buyers that it expects there will be issues with shipments out of Russia. Its Turkish subsidiary will also need to find replacement material to fulfill downstream product orders and will direct all of its own HRC production to feed its galvanising line. Although its own HRC production is significantly smaller than other Turkish mills, its absence will further exacerbate supply issues in the country.
Turkish re-rollers could source HRC from Indian or Chinese markets instead, both of which have been offering at the end of this week, but will struggle to find material on short lead times, and if they do they will have to a pay a premium. At the same time, slab supply will be much tighter in absence of the Ukrainian steelmaker, with Turkish re-rollers considering imports from Asia.
But Turkish producers have already been struggling with finished product sales because of high asking prices, particularly on the export side. While under EU scrutiny for dumping, they are careful not to reduce export prices considerably lower than domestic values. Meanwhile, Vietnamese and Indian hot-dip galvanized has been available at $50-80/t below Turkey in Europe. With the Turkish lira plunging to record lows against the US dollar and economic difficulties, domestic sales have weakened too.
In the billet segment, key outlets such as Egypt and Latin America have started seeking alternative options, with potential suppliers such as Turkey and India immediately lifting prices, despite insufficient demand for finished products. But Russian mills are expected to return to trading soon if more severe sanctions are not imposed.
Source:Argus Media
