Turkish export bid-offer spread widens to $250/mt

The bid-offer spread in the Eastern Mediterranean steel rebar export market has quickly widened to almost $250/mt with producers insistent that demand for the construction staple remains robust despite claims to the contrary from the steel trading community.

Reflecting the stand-off, the Platts Eastern Mediterranean rebar price assessment closed unchanged July 23 at a midpoint of $1,485/mt FOB Turkey.

"It's become a battle between the Turkish steel producers and buyers in Dubai," a UK-based trader told Platts July 23 "There is a lot of unsold material in Jebel Ali [Free Trade Zone] and I think that you would be able to book at $1,300/mt FOB Turkey," he added.

Such claims, however, were refuted by one of Turkey's leading steel producers and exporters to the United Arab Emirates market. "The traders are still trying their chances to correct the prices for the lowest level. They are giving incorrect information," said the producer.

Categorically denying a slowdown in the export market, the producer told Platts he had received rebar requests totaling 600,000 mt in the past week. "Just consider the consumption when they need this much material. As long as it's like this we are not expecting things to go down in the short-term," said the mill source.

"There is always going to be a shortage [of rebar] for the next three years," he continued. "At times, there may be seasonal changes like Ramadan, but in any case, for the long term there is going to be [price] increases."

The producer went so far as to forecast export prices of $1,700/mt FOB Turkey by the end of 2008 and "about $2,000/mt [FOB Turkey] by 2009." He was adamant that consumption in Dubai is not decreasing at all. "We are offering for September and October shipments," said the mill source.

Turkey's mills unafraid of Chinese threat

Turkish producers speaking to Platts voiced little concern about the imminent threat of a flood of cheaper Chinese rebar into the Emirates. Several claimed that only they can provide the type of material required for construction work in the Gulf.

But some players from the trading community disagreed.

"The Dubai buyers are starting to think that the Turkish producers have a strong hold on the market and it's no secret that Chinese material is being offered at $1,050-1,060/mt FOB China," said one trader. "Even with the risk of added duty and $100/mt for freight it is still much cheaper than that from Turkey," he pointed out.

The same trader explained that a steel certification system has emerged in Dubai under the auspices of the Dubai Central Laboratory.

He emphasized that instead of seeking only UK-CARES-approved rebar from Turkey, government-funded construction projects in Dubai could now select from any one of 31 approved suppliers.

The approval list now includes rebar producers in Turkey, China, Europe, South Korea, the Gulf Cooperation Council countries, and the US.

"I think what we are going to see is that this list of [approved] producers will be the one that most people look at when they wanted to buy," said the trader. Previously, only Turkish rebar and so-called 'blue steel' was considered.

"It has widened the supply options and so the Turkish [mills] will not be able to have a stranglehold on the market," he said.

Any influx of non-Turkish rebar, however, would not immediately spell disaster for the Turkish rebar export market, he commented, explaining that supply agreements for work already under way were likely to stand.

Still, the trader noted that this latest enterprise would open up buying options in Dubai. "There has been no competition in the [UAE] market for the past 10 years, not just in the last six months," he added.

"Each person has thrown in their opinion on what and where they want the market to be in order to fit into their expectations," said another producer. "But as far as we can see the picture will remain the same in the coming months with more rises to come." He admitted that Turkish mills had followed each others' price moves in the market.

"We have been following the other mills in Turkey - there is parallel pricing for most of the mills," said the producing source.

"We have to keep the market balanced with the price that we can [get]. There will always be speculation and we expect that," he said. "The buyers in Dubai will go to those they know, those who have supplied them with quality steel in the past."

Created: July 24, 2008

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