Metal Exports Decline Despite Firm Pricing Stance
Foreks - The results for the "TR-METALENDEKS Turkey Metal Industry Export Index," prepared by the Istanbul Iron and Non-Ferrous Metals Exporters' Association (IDDMIB), have been announced for November.
In November, TR-METALENDEKS was negatively affected by the global market stagnation, geopolitical and political developments, as well as domestic economic policies. The index for the export quantity of the metal industry turned downward again after an increase in October. The index fell from 137.3 points in October to 131.3 points in November. The export value index also decreased from 166.5 points to 158.1 points in November.
EXPORT PRICES REMAIN HIGH While the quantity and value sub-indices of TR-METALENDEKS decreased in November, the export unit prices managed to remain stable despite the declines. The metal industry export unit value index slightly decreased from 121.3 points in October to 120.4 points in November. Average export unit prices were $4.53/kg in October and $4.50/kg in November. Notably, despite a significant drop in global metal prices and declines in the prices of steel, copper, and aluminum in November, the export unit prices remained at high levels.
The metal export value continues to be dependent on quantity and price developments. However, the quantity and unit prices are still fluctuating in the last quarter of the year, while export markets maintain a tendency towards stagnation. Simultaneously, geopolitical developments and conflicts are also limiting demand. The increasing concerns over protectionism following the U.S. elections are expected to result in weak demand in the last month of the year. While major central banks are expected to continue with interest rate cuts, geopolitical developments and conflicts are anticipated to continue to suppress economic recovery. Possible trade wars following the U.S. elections are also raising concerns, and metal prices are expected to remain weak for some time. There is a prevailing opinion that a permanent recovery in export indices will require a longer waiting period.
GLOBAL INDUSTRY TIGHTENS, INTEREST RATE CUTS WILL TAKE TIME TO SHOW EFFECTS In November, geopolitical developments that have been effective throughout 2024 increased their impact, especially with the first use of ballistic missiles in the Russia-Ukraine war, negatively affecting expectations and activities in the European market, and energy prices across Europe rose again. Additionally, significant political developments occurred in November. With Trump's victory in the U.S. presidential elections, concerns over protectionism in trade increased, and signs of trade wars began to emerge. In Europe, the dissolution of governments in Germany and France marked some of the most important developments.
The results of the U.S. presidential elections have begun to show their initial effects on the global economy. The U.S. dollar gained value as expected, the euro fell, and commodity and metal prices declined due to the strong dollar and weak demand. In November, central banks in the U.S. and the U.K. continued to cut rates, signaling that rate cuts would persist.
The global manufacturing PMI data rose again to 50.0 points in November and remained in neutral territory. The manufacturing PMI data stood at 50.0 in the U.S., 51.5 in China, 45.2 in the Eurozone, and 49.0 in Japan. While limited recoveries were observed in November, it is expected that the contribution of interest rate cuts to the recovery in industries will take time. Geopolitical risks and structural issues will continue to limit recovery, especially for the Eurozone manufacturing sector.
DECLINE IN METAL INDUSTRY IN EUROPE IS CONCERNING FOR TURKEY In the context of the economic, political, and geopolitical developments and expectations in November, activities in the global metal industry continued to remain weak. The global metal industry production PMI data fell from 48.0 points to 47.6 points, indicating a continued contraction in production. The received orders PMI data increased from 46.5 points to 49.5 points.
European metal industry PMI data also remained weak in November. The European metal industry production PMI dropped from 44.0 to 41.0, while the orders PMI increased from 38.0 to 40.0. The significant contraction indicated by the metal industry data in Europe continues to raise concerns for Turkish metal industry exports.
HIGH FINANCING COSTS AND EXCHANGE RATES CHALLENGE EXPORTS In Turkey, monthly inflation exceeded expectations for both October and November, pushing annual inflation further away from the target for the end of 2024. The Central Bank of the Republic of Turkey (CBRT) upwardly revised its inflation targets for the end of 2024 and 2025, indicating that the tight monetary policies applied to achieve a decrease in inflation may take longer than anticipated.
As a result of tightening policies aimed at limiting domestic demand, the real sector continues to face challenges. The recovery in foreign markets is also being postponed. In light of these developments, a loss of momentum in industrial production is being observed. Additionally, with the continued real appreciation of the Turkish lira in November, high financing costs are continuing to strain exports and exporters.
NO SIGNS OF RECOVERY YET In the results of the expectation index created by the monthly expectation survey, no signs of recovery in export markets were observed for November, while the tightening policies applied domestically have begun to show a reducing effect on stocks.
According to the November expectation index, received export orders showed a limited decline. While markets remain stagnant, political and geopolitical developments continue to put pressure on them. In November, buyers continued to exert price pressure and request price reductions, while metal prices fell. The export unit prices in the received orders slightly decreased in November. The general tendency for a decline in the number of customers placing orders has continued at a slower pace. The profit margins in received export orders continue to face pressure from increasing global competition. Although the decline in profit margins slowed in November, the collection periods for received export orders remained stagnant.
As the tightening policies in the economy took effect, orders received from the domestic market fell in November, and production decreased slightly. The decline in received orders limited production, and the increases in production costs in Turkish lira continued to slow down in November. Raw material and input stocks showed a limited decline compared to the previous month, while raw material and input stocks stabilized due to domestic and export orders. As a result of weak demand both domestically and abroad, the stocks of finished products showed a limited decrease in November, following the declines seen in September and October.