Posted on 11 Jul 2023
Turkey’s VAT increase by presidential decree seems to have added more uncertainty to the country’s steel market.
On Thursday, the 18% VAT on steel products in Turkey was increased to 20% effective from 10 July. Although rebar sales in the domestic market have not yet recovered post-Eid holiday, despite lowered prices, the higher VAT will increase prices again this coming week. The unexpected VAT increase is seen to have confused the Turkish steel market and added further uncertainty regarding its outlook.
The Turkish market had a quiet week in terms of scrap purchases last week. Although a Marmara mill concluded purchases at the beginning of the week, other mills have not followed suit amid weak steel sales.
On Thursday night, a southern Turkish mill is heard to have bought a Germany-origin cargo comprising 27,000 tonnes of HMS 1&2 75:25 at $372/t and 3,000t of bonus at $397/t cfr Turkey. Although this points to a rise in prices, most market participants think this deal does not represent the market price and the market is no higher than the previous EU-origin HMS 1&2 80:20 deal level at $369/t cfr.
However, some European suppliers, referring to this deal, are seen to have increased their target prices to above $375/t cfr Turkey. Market participants now wonder how Turkish mills will react to scrap quotes while increasing their steel offer prices in the domestic market.
One mill tells Kallanish: “I think the downward trend in scrap prices will continue but I would not be surprised to see another mill paying a higher price for scrap. Either way, a remarkable increase in scrap prices is not likely in the near future.”
Although the VAT increase is expected to lift prices, demand in the Turkish domestic rebar market remained weak on Friday, as well as export demand. Activity was strong for shipments of previously bought material. Rebar offers from mills stood at $600-635/t ex-works, while stockists offered at around $585/t. On the other hand, accessibility to loans remains almost impossible.
Amid numerous issues in the Turkish market, Kallanish kept its daily assessment for HMS 1&2 80:20 unchanged at $375/t cfr Turkey on Friday.
Source:Kallanish
