Turkey

Turkey: Steel Industry Overview (2002)

Steel Map of Turkey

Turkish iron and steel sector, the base of which was established in the 1930’s, plays an important role in the industrialization and development of Turkish economy. Iron and steel production was first started in Kirikkale, which is now known as MKEK, in 1928, in order to produce steel products required for the defense industry.

The first integrated plant, Karabük Iron and Steel Works (KARDEMIR) began to operate in Karabük in 1937. In order to meet the demand for flat products, the second integrated plant, Eregli Iron and Steel Works (ERDEMIR) started production in 1965. In 1977, Iskenderun Iron and Steel Works (ISDEMIR), Turkey’s third integrated steel mill, came on line to meet the demand for long products and semi-finished products.

With the increase in the number of the private sector’s electric arc furnace steel mills after the 1960’s, the production capacity of the Turkish iron and steel industry reached to 4.2 million tons in 1980.

As a result of liberalization in economic activities, 1980 was a turning point, not only for the development of Turkish economy, but also for the iron and steel industry. During 1980’s, Turkish iron and steel industry, has shown a great progress in parallel with the establishment of the electric arc furnace mills and developments in the economic structure.

In July 1996, as a result of the agreement that Turkey signed with the European Coal and Steel Community (ECSC), elimination of customs duties mutually on steel trade, contributed to the development of the steel trade between Turkey and EU.

At present, Turkish steel sector, with its around 15 million tons of crude steel production and 9.5 million tons of total export, ranks in the 15th in the global steel output. Turkey has three integrated iron and steel works, total capacities of each range from 1.000.000 tons to 3.000.000 tons and 15 EAFs whose capacities range between 100.000 and 2.000.000 tons.

The three integrated steelmaking facilities account for 6.2 million tons or 30 % of the 20.8 million tons of total crude steel capacity, while 15 electric arc furnace (EAF) mills’ capacity is 14.6 million tons – almost 70 % in the year 2001.

In the year 2001, 17.3 million tons (84 %) of the 20.8 million tons of crude steel production capacity is allocated to long products, 3 million tons (14 %) to flat products, while the remaining 450,000 tons (2 %) is to special steel. Total crude steel production of the sector in 2001, including flat, long and special steel was 15 million tons.

In the year 2001, 78% of total crude steel production is directed towards long products, about 20 % is for flat products and only 2 % for special steel.

Since the flat products capacity is insufficient to meet the domestic demand, capacity utilization rate in flat products production went up to 99 % in 2001, while it remained around 67 % in long products, due to the excess capacity.

In the year 2001, in terms of production processes, 65 % of the total production is realized by Electric Arc Furnaces and the remaining 35 % by Integrated Facilities.

The share of steel products in total national exports increased from 1.9 % in 1981 to 9.7 % in 2001. On the other hand, Turkey’s share in the world steel production increased from 0.6 % in 1980 to 1.8 % in 2001. However, because of the severe economic crisis and 9.4 % decline in Gross National Product, steel consumption decreased by 34 % in 2001.

Because of the sharp decrease in steel consumption, consumption levels came to its early 1990’s levels and the existing low level of steel consumption per capita further dropped to the 1/3 of the consumption level of the developed countries. The decrease in the long products consumption, reached to 39 %. This led the long products producing steel mills export more than % 60 percent of their production. Electric arc furnace mills were even able to export more than 80 % of their production.

In order to eliminate the huge pressure on the steel sector, to export the excess production which could not be utilized in the internal markets, it is necessary to improve the levels of consumption per capita and eliminate of the structural problems in the sector, stemming from the production-consumption imbalance.

For this reason, takeover of Isdemir by Erdemir on condition that its conversion to flat products was the most important development in the Turkish steel sector in the last years. After the completion of the conversion within the next five years, contribution of the steel sector to the elimination of the foreign trade deficit is expected to increase considerably. Privatization of Isdemir, which was last state owned facility, is also important in that, Turkish iron and steel industry is now entirely operated by the private sector.

As a consequence of the severe economic crisis, which damaged credit mechanisms of the banking system and therefore, stopped almost all the investments in the construction sector, there has been a significant decrease in the consumption level. On the other hand, the increase in the exports by 28.2 % in terms of value due to the high foreign exchange rates and drop in the imports by 38 % facilitated the ratio of import/export boost to 166 % in 2001, from 80 % in 2000.

Turkey has been exporting mainly billet and long products and major markets for Turkish steel exports are the EU and Middle East countries. In 2001 steel products were exported to more than 130 countries in the world.

The Turkish iron and steel industry, has shown great progress in the last fifteen years, both in terms of quality and capacity and has been one of the growing iron and steel industries in the world. Currently, Turkish iron and steel sector ranks 15th among the 64 steel-making countries in the world and 5th in Europe. According to statistics of the year 2001, the share of EU, Middle East countries and Far East countries in the total iron and steel exports of 9.5 million tons are 28 %, 26 % and 16 % respectively.

However, global steel trade, which has been interfered by unfair trade barriers for a long time, has entered a new era of protectionism, which began with the US Section 201 investigation.
It is noted that these events, which is not in conformity with the developments towards globalization and removing the customs tariffs policies, may allow not only the new trade balances be established in the world steel trade but also may force the steel mills in a process of structural change to be able to meet the domestic demand.

In the year 2001, iron and steel demand in the domestic market decreased in a significant proportion because of the severe economic crisis.

After the elimination of the fixed exchange rate and adaptation of the fluctuating exchange rate policy by the Turkish Government in the February of 2001, the extraordinary increase in the exchange rates, almost stopped all the investments in the construction sector. The drastic fluctuation in the foreign exchange rates during the following moths of the year strengthened the tendencies of the postponement of the investments.

Because of these developments, except for the year 1994, which was another crisis year for Turkey, domestic iron and steel consumption decreased to the level of 10 years ago, that is lower than the consumption level in 1993.

Despite of the 33.5 % decrease in the iron and steel consumption which is 3.5 times more than, the 9.4 % sharp decline in Gross National Product, the growth in exports by 36.5 %, contributed to the increase in iron and steel production for the first time in the last 5 years by 4.6 %, to the level of 15 m tons in 2001. As a result of the increase in Turkish iron and steel production, together with the decrease in global steel production by 0.2 %, Turkey’s iron and steel output reached to the 15th in the world production league in 2001, from the 17th in the year 2000.

However, the expansion of the protectionist policies in the global steel industry, provoked by the Section 201 investigation that began on the 26th of June 2001, increased the uncertainties on the future of the global steel trade.

We wish all the uncertainties to be disappeared and new balances that will satisfy all the related parties, to be set up in the global steel trade in the year 2002.

Source:- Turkish Iron & Steel Producers Association

Agreement between the European Coal and Steel Community and the Republic of Turkey on trade in products covered by the Treaty establishing the European Coal and Steel Community - Protocol 1 on rules of origin.

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Turkish Steel Industry Overview (2002)
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