Turkey's Antidumping Investigation into Steel Imports
Turkey has launched a significant antidumping investigation into steel imports from China and South Korea. This inquiry will assess imports of specific steel products, particularly cold-rolled coils (CRC), galvanized steel, and pre-painted steel coils, spanning the period from mid-2023 to mid-2024.
Possible Measures During the Investigation
As this investigation unfolds, Turkish authorities are expected to implement provisional measures that might immediately affect trade practices. Additionally, they are considering the potential for retroactively applied final measures, which could reshape the landscape for steel imports significantly.
The Trend of Regionalization in Steel Trade
This investigation reflects a broader pattern toward the 'regionalization' of steel trade flows, as observed by Morgan Stanley (NYSE: MS). Recent findings indicate that China and South Korea play crucial roles as major exporters of steel to Turkey. In fact, data reveals that South Korea accounted for approximately 33% of Turkey's CRC imports, while China made up about 31% from January to October of the previous year.
Impact on Galvanized Steel Imports
In alignment with their CRC exports, South Korea and China also dominated Turkey's galvanized steel imports, representing around 36% and 25%, respectively, during the same timeframe. This correlation in import dynamics highlights the importance of these two countries in meeting Turkey's steel production needs.
Complementary Measures Against Other Countries
This investigation follows Turkey's recent actions aimed at hot-rolled coil imports from various countries, including China, Russia, India, and Japan. These measures are part of a comprehensive strategy to protect and promote the local steel industry.
Benefits for Local Producers
The potential implementation of these antidumping measures could significantly benefit local Turkish steel manufacturers, notably Erdemir, a prominent player in the Turkish steel market. Currently, flat steel products constitute about 90% of Erdemir's shipping volumes, of which CRC makes up roughly 20%. This shift could potentially enhance Erdemir's pricing power, giving them an edge in a competitive market.
Market Reactions and Forecast
Despite the optimistic projections for Erdemir stemming from these developments, the broader market consensus has largely anticipated a strong recovery in Erdemir's earnings before interest, taxes, depreciation, and amortization (EBITDA) by 2025. Morgan Stanley's forecast for Erdemir's adjusted EBITDA for 2025 stands at $0.96 billion, which remains lower than the Visible Alpha consensus estimate of $1.15 billion. Furthermore, projections for 2024 estimate approximately $0.7 billion in EBITDA.
Concluding Observations on Erdemir Shares
Despite the possibilities presented by the investigations and potential market shifts, Morgan Stanley continues to hold an Underweight rating on Erdemir shares. They stress the necessity for clear evidence of market impacts resulting from these trade measures before making significant investment decisions.
Frequently Asked Questions
What is the focus of Turkey's antidumping investigation?
The investigation targets steel imports, specifically cold-rolled coils, galvanized, and pre-painted steel products from China and South Korea.
What measures may Turkey implement during the investigation?
Turkey may enforce provisional measures and has the option to apply final measures retroactively to imported products.
How significant are China and South Korea in Turkey's steel imports?
South Korea and China together comprise approximately 64% of Turkey's total CRC imports and a notable share of galvanized steel imports as well.
What is Erdemir's projected EBITDA for 2025?
Morgan Stanley projects Erdemir's adjusted EBITDA for 2025 to be approximately $0.96 billion.
What is Morgan Stanley's current rating on Erdemir shares?
The firm maintains an Underweight rating on Erdemir shares, awaiting evidence of market impacts from the new trade measures.
