In the midst of further price rises, the Turkish steel market is shocked by the Central Bank’s unexpected interest rate hike on Thursday.

Turkey’s Central Bank, which had been following an opposite strategy and keeping interest rate hikes low despite the high inflation, increased loan rates unexpectedly from 17.5% to 25% on Thursday. This has caused Turkish lira to appreciate sharply against other currencies while bringing the steel trade in the domestic market to a halt.

While some longs producers have decreased their offer prices on a TRY basis following the appreciation of the lira, some are seen halting sales and waiting for exchange rates to settle. However, domestic rebar prices on a USD basis, stood mostly at above $580/tonne ex-works.

Stockists, who took positions in anticipation of a smaller interest rate hike and stocked up at high dollar exchange rates, recorded large losses following the sharp appreciation of the lira. Stockists are expected to conclude more purchases now in order to lower their average inventory costs. 

A trader tells Kallanish: "We had a day of seller's delight and buyer's regret. I am curious at what prices mills will open sales tomorrow. Despite some downward correction, today’s prices are not workable at all.”

In the export market, Turkish mills’ official rebar offers stood mostly at $580-590/t fob Turkey actual weight on Thursday, up from $570-580/t a week earlier, while offers for mesh-quality wire rod were at $590-600/t fob.

Sales, however, remained quite limited to small volumes and traditional markets this week as the spread between Turkey’s and competition’s prices has further widened, making Turkish offers more unattractive.

In the scrap market, prices are seen remaining quite firm on two fresh deals. A Marmara mill bought EU-origin HMS 1&2 80:20 at $369/t cfr while another mill bought the same grade at $374/t and shredded at $394/t cfr from the US.