Expansion of steelmaking capacities in Malaysia and Indonesia impacting Turkish import market

China was Türkiye's primary supplier of flat products last year, benefitting from increased volumes due to the conflict in Ukraine and rising Chinese exports amidst sluggish domestic demand. While China may continue to play a key role in Türkiye's import market, its share could be influenced by new sellers entering the market.

Towards the end of this year, Malaysia's Eastern Steel plans to commence operations of a new facility capable of producing 3.5 million tons per year of flat products. The company intends to export approximately 2.2 million tons per year of hot-rolled coil (HRC), with Türkiye identified as a key market. Malaysia currently benefits from a free trade agreement (FTA) with Türkiye, exempting steel product imports from the 13-15% customs duty.

Similarly, Indonesia is in negotiations for its own FTA with Türkiye, which could facilitate Dexin Steel's project to establish a new flat steel mill with a capacity of 4 million tons per year of stainless and carbon flat products by the end of this summer. This presents another potential duty-free source for Turkish buyers.

The potential introduction of anti-dumping duties on HRC from China, India, Russia, and Japan could drive interest in flat products from alternative suppliers. While many Turkish buyers currently operate under inward processing regime licenses, exempting them from import duties but restricting domestic market consumption, the introduction of anti-dumping duties could prompt increased consumption of Malaysian and Indonesian coil for domestic use.

Market participants anticipate Malaysia playing a crucial role in Türkiye's steel supply chain moving forward, with some buyers expressing interest in regular purchases from Malaysia once their capacities are operational. Türkiye imported 150,000 tons of flat products from ASEAN countries last year, with significant contributions from Indonesia and Vietnam. Increased activity from the ASEAN region, particularly supported by Malaysia, is expected, while Indonesia's role hinges on the outcome of FTA negotiations.