Turkish steel industry is in the doldrums
The Turkish steel industry has been stormed by political and economic policies implications
Turkey is the eighth largest steel producer and the 10th largest exporter in the world. Turkish crude steel production decreased by 12.5% year-on-year in February 2019, and reached 2.64 million tonnes, according to the Turkish Steel Producers Association (TCUD). The production was slightly above the January 2019 figures, when it reached around a 3-year low of 2.56 million tonnes. Most of the decrease in steel production was witnessed in EAF based output compared to BOF.
The slowdown in steel production is to some extent related to the country’s poor economic conditions. Its currency fell by around 47% against the US dollar in August 2018, while inflation increased to 25% in October.
Weak economic conditions also hit the domestic end-user markets. For Instance, Turkish auto output reached 119.4k units in February this year, decreased by 15.5% year-on-year. Cumulative automotive production decreased by 13.7% year-on-year, in the first two months of 2019.
Meanwhile, vehicles sales reached 25.6k in February, decreased by 47.5%. While vehicles exports reached 106k units, fell by 12.6% year-on-year in the same month, according to the Automotive Manufacturers Association (OSD).
Despite the 50% US tariffs on Turkish steel exports to the US, yet the country’s overall exports surged during 2018. The country’s steel exports reached 21.4 million tonnes, rose by 20.8% year-on-year, according to the Turkish Steel Exporters Association. Turkey’s export to the US decreased from 1.7 million tonnes to 1.1 million tonnes year-on-year in 2018. The US slid from the top to the fourth position for Turkish steel exports destinations during 2018. Most of the imports were destined to the EU, the Middle East and North America during 2018.
One of the reasons behind the overall increase in Turkey’s steel exports is due to its highly disperse exports destinations. Previously, the US had held an 11% share in the top 10 Turkish steel exports destinations, which dropped to just 5% in 2018. Meanwhile, Turkish steel exports tow other markets increased as well. For instance, the Turkish steel exports to Latin America reached 1.1 million tonnes, increased by 8.4% year-on-year during the first ten months of 2018.
Week domestic demand, tough trade actions in the international market and persistent rise in the Chinese exports are expected to give a tough time to the Turkish steel industry during the current year. President Recep Tayyip Erdogan had also faced a significant setback in the last week local election when his party lost control of the capital, Ankara. The poor election performance is considered as a repercussion of the government economic policies. However, it is unlikely that the results will influence the government economic policies. We expect that Turkish steel production and exports are expected to face tough times in 2019.
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