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Turkey Metals Report Q3 2009Product Type: Market Research ReportPublished by: Business Monitor International Published: July 2009 Product Code: R302-7072 Description BMI’s latest Turkey Metals Report forecasts a sharp but short contraction in Turkish steel output, withsigns of a tentative recovery in prices from Q309 signalling a turnaround.In the first four months of 2009, Turkish crude steel output was down 18.8% year-on-year (y-o-y) to7.45mn tonnes. However, there are strong signs that the industry is turning the corner, with April outputdown 13.2% y-o-y but up 8.2% month-on-month (m-o-m) to 1.98mn tonnes. This apparent recovery fromFebruary’s low of 1.7mn tonnes was stimulated by rising demand for longs ahead of the mid-yearconstruction season as well as restocking, and an overall rise in industrial output. Significant steel priceincreases are expected in Q409, when the recovery begins to really pick up. BMI forecasts a modest risein demand in June-July, a slight fall in July-August and accelerating from September. With the Turkish economy in recession and BMI forecasting a 5.7% contraction in GDP in 2009, the steelindustry is set to suffer a sharp decline in output. BMI anticipates a 17% fall in crude steel output to22.28mn tonnes in 2009, the lowest level since 2005. The decline in output will be sharp, but BMIexpects it will be short-lived and that Turkey will retain its long-term position as one of the world’slargest steel exporting nations. Arab countries have been crucial to sustaining Turkish output, with exports to these markets up by 45%y-o-y to 4.2mn tonnes in the first four months of the year. As a result, Arab markets consumed at leasthalf Turkish steel output, compared with around a third in the same period of 2008. The Egyptian marketis the largest importer of Turkey’s steel products, consuming 1.7mn tonnes of Turkish steel in theJanuary-April period compared to 58,000 tonnes in the same period of 2008. As a result, Egypt overtookthe UAE as Turkey’s largest market. The UAE’s imports during the period declined by two-thirds to553,000 tonnes as its construction and real estate sectors ground to a halt. BMI forecasts a fall in exports of nearly 11% in 2009 to 16.3mn tonnes. We expect exports to recover in2010 with a rise of 7% to 17.45mn tonnes. By 2013, exports should total 27.82mn tonnes, an increase of52% over 2008 levels. A major risk factor for the Turkish metals industry is the excessively volatileexchange rate, which is making it hard for producers to plan costs. Fundamental pressures over the longerterm are expected to remain firmly weighted towards weak lira performance. Turkey is also dependent oncoal imports for two-thirds of national consumption. The competitiveness of the steel and aluminiumindustry therefore depends on the effectiveness of efforts to stabilise the exchange rate. In terms of imports, the government’s move towards trade protectionism means that cheaper productsfrom Asia are less attractive on the Turkish market. The effect of increased import duties on steelproducts from January was immediate, with new import transactions grinding to a halt as the Turkishmarket sought domestic sources. As a result of the increase in duties, BMI forecasts a decline of over30% in steel imports to 9.07mn tonnes, the lowest level since 2004. However, a strong recovery isanticipated from 2010, when imports are expected to grow 13% to 10.2mn tonnes. By 2013, Turkishimports should total 15.8mn tonnes in volume and US$15.4bn in value. The steel trade surplus should bearound US$8.56bn, up from US$3.2bn in 2008. Table of Contents
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