COVID-19 hit Turkey's economy mid-March. Most industrial sectors, including steel long product mills, halted production in April, when the nation's monthly crude steel output dropped 26.3% on year to 2.2 million mt, after a strong first quarter, according to the World Steel Association.
Due to the adoption of stringent measures, the spread of the virus has slowed in recent weeks and most of Turkey's industrial sectors, including most steel mills, had restarted production as of the second week of May, in line with normalization efforts globally.
However, the domestic steel market outlook is bleak for the rest of the year, despite government efforts to spur domestic demand by cutting interest rates. In Turkey's major European Union export market there are rising protectionist pressures.
Construction, typically the biggest steel-using sector, is expected to continue to shrink in Turkey during 2020 from 2019 levels.
Turkish automotive producers - typically the second biggest steel consuming sector - plan to raise capacity use only gradually depending on market conditions, following a 91% on-year plunge in production in April, when white goods production shrank 54%.
The World Bank has slashed Turkey's growth estimate for 2020 to 0.5%, from 3% foreseen before the COVID-19 pandemic.
Mills' capacity usage fell as low as 45% in April, according to Turkish Steel Producers' Association TCUD. Ugur Dalbeler, CEO of major producer Colakoglu, believes the second quarter will be "hard" for Turkish mills, with market recovery possible in the second half of the year. Turkish mills' 2020 crude steel output is expected to fall significantly from 2019.
Sharp exchange rate fluctuations, together with virus-related business interruptions, have significantly damaged most of the small, medium and even large Turkish steel producers' balance sheets, sources say. "The first half of 2020 has been lost. Let's hope that there's some relief in the second half," a steel service center manager said.