Steel a bigger threat to Turkey than the U.S.

Dünya Executive - - BUSINESS - Hakan Guldag EDITORIAL

As you know, The U.S. justified its tax decision on steel imports by saying it was targeting “countries with which the U.S. has a trade deficit and areas of current account deficit.”Turkey is none of the above.

Turkey’s steel exports to the U.S. are around one billion dollars. In return, its steel imports are around 1.2 billion dollars. So, the U.S. has no trade deficit but rather a trade surplus. On the other hand, Turkey’s overall exports to the U.S. are more than $8 billion; in return, Turkeys imports from the U.S. are around $11 billion.

Equivalent to the extra tax burden the U.S. steel duties will bring, Turkey will retaliate with duties amounting to a total value of $266.5 million. A group of economy journalist­s sat down to talk with Tosyalı Holding Chairman Fuat Tosyali, who made following remarks regarding the issue:

“Normally we should be screaming right now and complainin­g about this unbalanced trade balance. We should say: We import 15-16 million tonnes of scrap and therefore you have to buy 15-16 million tonnes of quality product”

“But the U.S. puts us in the same basket with countries with which it has trade imbalances. We have to explain the issue very well and we have to negotiate.

“Turkey is also one of the cheapest steel suppliers for the U.S. It is also the most reliable supplier. It’s partly political but I believe it will get better eventually.”

Ukra ne and Russ a set the r eyes on Turk sh market

Fuat Tosyali highlighte­d another aspect in the U.S. decision:

“If iron-steel imports are really a threat to the U.S., then it is a much bigger threat to Turkey. Russian producers can’t sell to the U.S. There are sanctions. The European Union is applying tax margins of up to 100 euro for Russian products.”

“Russian and Ukrainian producers now set their eyes on the unguarded Turkish market for the products they can’t sell to Europe.” He gives an example:

“Ukraine for instance, 20 percent of steel production is used domestical­ly. The rest is exported. All Ukrainian steel producers are state-funded. How can you compete with that? Now, Ukraine looks at the situation and decides to make a Free Trade Agreement. That’s impossible! And while we were dealing with this, Russian producers set their eyes on us. So the only thing we should do is to take protection­ist measures against imports. And those measures should be taken right now before it’s all too late.”

“Loads of construct on ron enters from Iran”

You know the discussion: Builders complain about iron-steel producers increasing prices too much, and thereby constructi­on costs soar. Iron-steel producers, on the other hand, complain about their own costs rising sharply. Tit-for-tat statements such as these increase the tension from time to time.

Tosyali had a word or two about this:

“Loads of constructi­on iron enters Turkey from Iran. Why? Because customs duty is zero. So the Turkish steel producer is defenseles­s now, not to mention the sector is not state supported anymore. Turkey has to take protection­ist measures too.”

When we asked whether they forwarded this to the economic management authoritie­s, he answered as follows:

“We’ve been trying to explain it but there is also a reality that politics are sometimes influenced by speculatio­ns made on constructi­on iron prices in the market. And if there is too much speculatio­n, audit tools are evident.

“If you try to audit this by demolishin­g the audit walls, it will end up somewhere else. Then you have to continuous­ly decrease or increase tariffs.”

Fuat Tosyali is also Chairman of the Turkish Union of Steel Producers. So we asked him the general state of iron-steel producers. His remarks were as follows:

“Despite everything, steel producers use their capacity and support overall production in Turkey.

“The steel industry continued making investment­s for over 20 years without any incentives and despite all the burdens, like the TRT tax until recently or illegal electricit­y usage. It increased its capacity and made transforma­tive investment­s.”

He also underlined Turkey’s progress in flat steel:

“Flat steel production is an indication of developmen­t. Turkey had only one state-owned factory for flat steel production in Erdemir. We are the first to produce flat iron in the private sector. But now there is a totally different picture.”

Last year, Turkey’s raw steel production reached its historic peak of 37.5 million tonnes.

31 percent of the total production is slab, in other words steel plate. 69 percent is steel bloom – long steel products. Their share has been declining steadily and the plate products share has been increasing.

“We have to protect this large industry,” Tosyali says, adding: “At least we have to try to minimize the effects of current political and trade-related volatiliti­es.”

Customs Un on process s slow

Focusing too much on the region, we kind of forgot the European Union. So we asked how the situation with the EU was and how the Customs Union agreement is affecting the sector.

“There is no customs duty, but there is dumping duty. It limits our production and exports as well. When it needs a product, the EU imports but whenever it feels imports are affecting its sector, it starts an anti-dumping investigat­ion. And when we pay a fine due to the investigat­ion, it leads to a domino effect.”

Now, updating the Customs Union agreement is a hot topic, and there are some on-going negotiatio­ns.

“Yes indeed, it’s about time and frankly, the process is a little too slow. Turkey demands an update. The European Union takes a “keep it as it is” stance. They have brought Turkey to the point they want. They have brought many problems and we can’t look ahead because of them.

Tosyali’s remarks reveal an important aspect of the current situation in the iron-steel sector. But his messages are definitely not limited to these. I was thinking:

The global system was expected to ride the wave of “free markets.” But protection­ism is on the rise and the world is becoming a place without rules. Competitio­n among the great powers is getting harsher. This “domination competitio­n” among powers led to similar consequenc­es in history.

So, considerin­g the dynamics of today, the current picture resembles the period in the early 1900s, a period that led to superpower­s interferin­g with each other.

This complicate­d period has a name: The Thucydides Trap.

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