Market Monitor - Focus on steel and metals - Turkey

Market Monitor

  • Turkey
  • Metals,
  • Steel

10th September 2015

Decreasing profitability due to foreign exchange losses and rising insolvencies.

  • Sector suffers from high inventories
  • Increases in late payments and insolvencies
  • Our underwriting stance is cautious

Turkey’s crude steel production capacity increased 1.9% year-onyear in 2014, to 50.2 million tonnes, retaining its position as the world’s eighth-largest crude steel producer. However, production decreased 8.8% in Q1 of 2015, while domestic consumption of crude steel increased 9%. In 2014, Turkish steel export volumes decreased 5%, to 18 million tonnes. 

In 2014, net profitability of many Turkish steel businesses decreased further, as foreign exchange losses resulted from the depreciation of the Turkish lira. Pressure on profitability is expected to increase further in 2015 due to on-going currency volatility and a more uncertain economic outlook. As many smaller steel firms hold high bank debts in order to keep high inventories, the current economic slowdown has caused liquidity problems in this segment. Overall indebtedness in the sector is average, but banks have become increasingly unwilling to provide credit. Smaller players in particular often cannot increase bank loans due to frequent non-performing loan cases.

On average, payments in the Turkish steel and metals industry take 60 days, and it is expected that payment delays will further deteriorate in the coming months, after increasing in H1 of 2015. Insolvencies of steel businesses are expected to increase further in H2 of 2015. Therefore, we have adopted a cautious underwriting stance towards this industry, especially for small and medium- sized enterprises.

Our main criteria for assessing credit limit applications are shareholder structure, equity level and cash position. For new buyers we look at payment behaviour issues such as bounced cheques or protested bills.

To maximise cover we contact the buyers, banks and information agencies for additional financial information. Our customers can help in such cases, through their close relations with buyers. If, with all the available information, we still have to restrict cover, we will of course explain our decision to our customer.

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Disclaimer

The statements made herein are provided solely for general informational purposes and should not be relied upon for any purpose. Please refer to the actual policy or the relevant product or services agreement for the governing terms. Nothing herein should be construed to create any right, obligation, advice or responsibility on the part of Atradius, including any obligation to conduct due diligence of buyers or on your behalf. If Atradius does conduct due diligence on any buyer it is for its own underwriting purposes and not for the benefit of the insured or any other person. Additionally, in no event shall Atradius and its related, affiliated and subsidiary companies be liable for any direct, indirect, special, incidental, or consequential damages arising out of the use of the statements made information herein.