Donald Trump’s steel tariffs mean Turkey needs to find new markets
President Donald Trump’s latest broadside against Turkish steel is a new blow to one of the country’s most important industries and will reshape global trade flows.
Under a higher level of tariffs, Turkey will continue to lose US customers, once its most important steel market. The new tariffs will not put Turkish steel makers out of business, but force them to find new markets, likely across North Africa or the Middle East, or displace other imports to Europe.
"It’s certainly a challenge for Turkey’s steel," Colin Hamilton, MD for commodities research at BMO Capital Markets, said in an e-mail. "They mainly import scrap, which has just become more expensive in lira terms, and export products. "
The US plans to double tariffs on the nation’s steel to 50%, and raise the rate on aluminium to 20%, Trump said on Twitter on Friday.
Turkey makes up 62% of bars used to reinforce concrete and masonry structures coming into the US. It also accounts for 37% of imported pipes for piling, which is used for foundation support and construction, and 14% of cold-rolled sheet. The tariffs are likely to put US steel companies in a favourable position, with Nucor, Commercial Metals, and Steel Dynamics set to be among the big beneficiaries, according to Andrew Cosgrove, a senior analyst at Bloomberg Intelligence.
Turkey exported about 500,000 tonnes to the US in the five months to May, compared with more than 1-million tonnes in the same period in 2017, according to data from the US Census bureau. The US has fallen from Turkey’s main steel buyer to number three.
Steel, in its more basic form of slabs, sheet or reinforcing bar, is a highly liquid market and it’s usually easy for a company to find a new buyer. Attacking imports has become a favourite tool of politicians from Europe to the US, causing flows to be rerouted. The global industry has been described as a game of whack-a-mole; if exports are blocked in one market, the action shifts elsewhere.
Turkey ranks as the world’s eighth-biggest steel producer. In aluminium, it’s 31, a tiny player. The US imported about 4,500 tonnes of aluminium bars, rods and profiles from the country in 2017, according to World Bank statistics.
The US measures are designed to add pressure to Turkey to release a US, and will further squeeze an economy that’s being engulfed by a financial crisis and plunging currency. An index of Turkish steel stocks sank almost 10% after the announcement, before recovering some of those losses.
In response to US tariffs earlier this year, Turkey turned its exports toward European countries, such as Italy and Spain. The new US tariffs will heighten fears that even more steel will head to the region, pressuring European producers. Regulators have introduced so-called safeguard measures, which slap tariffs on steel if imports exceed historical averages.
"The tariffs on Turkey itself won’t form a big threat" to Europe, Philip Ngotho, an analyst at ABN Amro Bank, said by e-mail. "Europe has measures in place to limit imports of steel into Europe, so that will continue to offer some protection from potentially cheaper and more steel from Turkey."
• With Mark Burton and Luzi Ann Javier