Currency depreciation and high energy costs hit demand for long products in Turkey

The depreciation of the Turkish lira against the US dollar hit demand in the domestic long products market in Turkey, while the supply of Turkish rebar plants in the export market came under pressure due to falling prices for scrap metal, S&P Global Commodity Insights reported on June 10 sources in manufacturing and trading companies.

Platts valued Turkish imports of 1/2 (80:20) premium heavy-melting scrap at $425/t CFR on June 9, down $4/t on the same day. According to data from S&P Global, the valuation has fallen by $225 per tonne since the CFR reached $650 per tonne on April 11.

Sources said some Turkish manufacturers, which have been facing higher energy costs since June 1, have halved their production capacity, while others are considering shutting down for short maintenance periods.

A major Turkish long steel producer said its company has halved working hours at its smelter and is considering suspending production if the lukewarm mood persists, while another steelmaker said its company is implementing short production breaks depending on market conditions.

A trading company manager said a major manufacturer in southern Turkey has taken a week-long maintenance break, but production is expected to resume from June 13.

“Another manufacturer in our region is expected to start maintenance in the coming weeks due to market sluggishness,” he said.

Turkey's energy prices soared on June 1, with state gas distributor Botas saying natural gas prices have risen by 30% for residential use and 10% for industrial use. The Energy Market Regulatory Authority, or EPDK, also reported that electricity prices for industrial use rose by 25%.

A further rise in electricity prices is expected in July as the EPCR changes the method of calculating industrial electricity prices effective July 1, which, according to some reports, could increase tariffs by as much as 71-86%.

The operating levels of Turkish rebar in the export market continued to decline as buyers refrained from lowering scrap metal prices. Platts valued Turkish rebar exports down $5/t on the day to $735/t FOB on June 9.

Working prices may fall in the coming days amid lower prices for imported scrap, a service center manager said on June 10.

A major Turkish mill was reported to have booked scrap from the EU at a price below $400 per tonne CFR, further impacting prices, an industry source said on June 10.