Gorkem Bolaca, managing director of UK- and Turkey-based steel trading firm Galex Steel International, has shared with Kallanish his thoughts on Turkish exports being impacted by the US doubling its tariffs on Turkish steel.

“I think the double tariffs announced by the US in August for Turkish steel products and aluminium will surely eliminate all export potential of Turkish producers,” Bolaca says. “Although it is sad and it is not in line with WTO rules, at the end of the day steel exports to the US account for 10% of Turkey’s total steel exports. Therefore, I don’t think it will bring irreversible damage to the Turkish steel industry.”

Similarly, the European Union’s imposition earlier in the summer of its new quota system for most steel products is not set to have an effect on Turkey until the very end of the year. “The latest EU safeguards decision will start to affect Turkish exports once the quota is filled by 90%. We have no clue yet how long it will take to reach that point. I would not expect any significant exports in December, for example,” Bolaca explains.

In recent years Turkey has significantly increased the volume of flat steel products sold to Europe, but has also continued to import large volumes from Europe. “The irony here is that for the first time in history Turkish flats exports to the EU exceeded Turkish flats imports from the EU by a very small percentage,” Bolaca comments. “Turkey and the EU have an agreement on free trade; the problem of today is governments are going after short-term profit instead of standing by their long-term agreements.”

Since the beginning of August the Turkish lira has devalued massively, falling from TRY 4.9 per dollar to as low as TRY 7 per dollar in mid-August. The currency has now recovered somewhat, to TRY 6.1 per dollar, but remains very fragile, creating issues for Turkey’s steel industry.

“Foreign trade deficit is the fundamental problem of the Turkish economy. A significant part of it comes from oil and gas imports due to Turkey not having its own energy resources. On the other hand, the majority of Turkish industry needs to import raw materials as an input to process and make production,” Bolaca observes.

“Turkish steel companies are loaded with foreign debt, but in the local market they need to sell in Turkish lira, to re-finance their foreign debts,” he continues. “I believe the sudden fluctuations in foreign currency creates big pressure on the private sector in Turkey. A significant part of mills’ input costs are in foreign currency; they therefore owe in foreign currency and earn in Turkish lira which depreciates at high speed.”

Looking ahead Bolaca believes that “…the Turkish economy will continue to be fragile unless it starts to take long-term painful steps to improve its trade deficit.” Nevertheless, “…Turkey continues to have a geographical advantage to reach different markets.”

“The private sector in Turkey is capable of handling problems with utmost efficiency due to its experience, and the Turkish economy has been through many crises in the past,” the trader concludes.

Gorkem Bolaca will be presenting at Kallanish Euro-Turkey Flat Steel Seminar, held in Istanbul on 24 October with the support of local associations CIB, TCUD and YISAD.