Crude steel production in 2020’s first quarter experienced 9.6% increase, and finished steel consumption increased considerably by 42.3% to 7.7 million tons. Compared to February, Turkish steel sector’s production and consumption also showed potential early signs local of rebounding in March. On the other hand, pandemic’s impact became more visible for steel exports’ performance. In March, volume of Turkish steel exports declined 23.4% down to 1.6 million tons, and monthly steel exports down to $1.2 billion with %22.8 decrease. Turkish basic metal output was also 1% lower in March.
Compared to last year’s first quarter; 2020 Q1’s Turkish steel exports were %11.6 lower at 5.1 million tons volume, whereas steel imports’ volume and value grew considerably to 3.6 million tons with 33.3% increase to $2.6 billion.
|Turkish Steel 2020 Q1||January||February||March||2020 Q1 Total||Change %
|Crude Steel Production||3,000,000 tons||2,900,000 tons||3,100,000 tons||9,000,000 tons||+9.6%|
|Finished Steel Consumption||2,000,000 tons||3,000,000 tons||2,700,000 tons||7,700,000 tons||+42.3%|
|Steel Exports||1,900,000 tons||1,600,000 tons||1,600,000 tons||5,100,000 tons||-11.6%|
|Steel Exports’ Value||$1.3 billion||$1.1 billion||$1.2 billion||$3.6 billion||-14.4%|
|Steel Imports||1,400,000 tons||1,200,000 tons||1,000,000 tons||3,600,000 tons||+33.3%|
|Steel Imports’ Value||$950 million||$817 million||$833 million||$2.6 billion||+13.4%|
According to TUIK, during the first quarter of 2020, Turkish hot rolled coil exports volume declined by 35.4% to 626,040 tons, and HRC exports’ value considerably decreased down to $287.58 million by 44.4% compared to 2019 Q1. Between January – March 2020, Turkish wire rod exports’ volume declined 31.6% to 324,000 tons, and wire rod exports’ value was down 37.5% to $149.35 million compared to 2019 Q1. In March 2020, Turkish rebar exports were up by 13.7% by reaching 527,671 tons volume, worth $225.22 million.
Steel Outlook – Uncertainty For Next Quarters
In the past few months, many steel factories adjusted their production parallel to falling demand, and halting their blast furnaces, or reducing their operations in line with governments’ guidelines. Similar to declining value of Turkish steel exports, other countries’ steel sectors also face an uphill battle. French Ministry of Economy, Finance and Industry reported that steel products exports value is down 19.8% in 2020 Q1, and basic steel products and ferroalloy imports, valued €1.97 billion, point out to 21% decrease in value compared to 2019.
Before the pandemic’s impact, in 2019 Q4, apparent steel consumption declined 10.8% in the EU. According to Eurofer, steel consumption and overall economic outlook are declining during Covid-19 outbreak. Last month, the association said EU steel production declined 50%, and new orders have shrunk 70 – 75%. On the bright side, the European Steel Association expects almost all industrial sectors to restart again in early 2020 Q3.
ArcelorMittal reported $1.12 billion worth net loss for the same period, signaling a sharp decrease from $414 million net profits in 2019 Q1. Amid pandemic, company’s steel shipments declined 1.2%, and crude steel production was 12.4% lower compared to the same period last year. Company’s CEO Lakshmi N. Mittal’s comments underlined an overall uncertainty for steel sector’s near future. While lockdown measures are easing across countries, construction and manufacturing sectors are expected to restart first. For 2020 Q2, ArcelorMittal’s expected steel shipments are within range of 13.5 – 14.5 million tons.
Nippon Steel, Japan’s biggest and world’s 3rd largest steelmaker, reported a net loss of $4 billion for the year to the end of March. Last month, the company reduced its blast furnace steel production volume by 25% amid decreasing demand from delayed construction projects and a considerable 7.4% drop in Japanese auto output. Eiji Hashimoto, Nippon Steel’s president, pointed out to unavoidable losses in 2020 Q2, adding that any recovery in steel industry after pandemic will likely come slower than other industries. Similarly, JFE Steel reported $1.84 billion loss, while aiming to slash inventories and temporarily suspending two blast furnaces.
Car Sales Signal Steel Demand’s Future
Turkish Automotive Manufacturers’ Association April 2020 statistics show critical declines in the local industry during pandemic. Compared to January – April 2019, country’s vehicle output was 28% lower (352,309 units total), whereas commercial vehicle output declined 96.6% (1,503 units) and passenger car output shrunk %88.4 (9,661 units) in the first four months period of 2020.
After months of closure, auto industry showed signs of slumping sales. In U.S., retailers have sold nearly 800,000 fewer vehicles than previously forecasted, and General Motor’s 2020 Q1 earnings report revealed that the pandemic cost company $1.4 billion. Moody’s downgraded Ford’s credit rating, reviewing General Motors’ rating for a potential downgrade. As both companies restarted their operations, both GM’s and Ford’s shares increased 9% and 6.7% respectively on May 18th.
According to Apple Maps data for major cities, consumers’ preference towards cars is also shifting favorably as more consumers are driving cars than taking public transit. And in U.S., AutoNation, nation’s largest new car dealership, is experiencing improving sales after a steep decline in the early days of Covid-19 outbreak.
Turkish Steel’s Near Future Outlook
As Turkish steel 2020 Q1’s performance showed, despite the easing lockdowns across the globe, steel exports is potentially more vulnerable to further declines. Coupled with EU’s new anti-dumping investigation focusing on Turkish hot rolled flat steel, there’s a chance that ever-changing trade relations may impact Turkish steel exporters’ near future. Local steel sector will be eyeing automotive and construction sectors’ performance closely. As pandemic period continues, steel prices are positioned to get cheaper.