Turkey

Turkey: Steel Industry Overview (2014)

Steel Map of Turkey

Crude Steel Production

Turkey became the third country among the largest steel producers in terms of production growth rate between 2007-2012 after China and India. Turkey achieved the largest production growth in 2011 and 2012. However, positive growth tendency turned negative in 2013 and Turkey’s crude steel production fell by 3.4 %, although world crude steel production continued to increase. In 2014, Turkey’s steel production dropped another 1.8 % to 34.04 million tons, which implied a total production drop of 5.2 % during the last 2 years.  After 1.8 % drop in 2014, Turkey’s total crude steel production fell behind its production level in 2011. While billet production fell by 6.4 % to 24.6 million tons, slab production grew by 12.7 % to 9.42 million tons. Despite that, slab production stayed below 2011 level. In contrast to the fall in Turkey’s crude steel production during the last 2 years, world crude steel production grew around 5 % during the same period.

Narrowing margins between scrap and finished steel products negatively affected Turkey’s competitiveness and production. As a result,  Turkey’s total crude steel production in the EAF mills, which consumes ferrous scrap as the main raw material, dropped by 3.9 %, while production of the BOF mills increased by 3.5 %. In 2014, billet accounted for around 72 % of the total crude steel production. In terms of processes, EAF mills accounted for around 70 % of the total crude steel production.

Despite the drop in the last 2 years, Turkey managed to increase its crude steel production by 32 % in 2014 compared to the pre crisis level of 2007.

Capacity and Capacity Utilization

Turkey’s crude steel production capacity reached 50.2 million tons in 2014, up slightly by 1.9% from 49.25 million tons in the previous year. Share of the electric arc furnace mills in the total capacity reached 77 % level. Despite the slowdown, increasing tendency in crude steel production capacity and drop in production continued to weaken capacity utilization rate. According to the World Steel Association figures, capacity utilization rate in the world crude steel production dropped to 70.8 % in 2014 from 72.4 % in 2013. In parallel to global trend, capacity utilization of the Turkish steel industry went down from 70 % in 2013 to 68 % in 2014, which is 3 percentage points lower than global average. In slab production, the capacity utilization rate increased from 52 % to 55 % level. In addition to the negative effect of the increasing raw materials prices on the competitiveness of the industry, high volume of non certified and low quality steel import also played an important role in the underperformance of the steel industry. 

Finished Steel Production & Consumption

While Turkey’s total crude steel production fell by 1.8 %, the drop in the finished steel production stayed at 0.9 % with the support of semi finished steel import. Turkey’s finished steel production dropped by 0.9 % in 2014 from 36.4 million tons to 36.1 million tons. While finished long steel production dropped by 3.1 % 25.7 million tons, flat steel production grew by 5.1 % to 10.4 million tons. Long steel accounted for 71.3 % of the total finished steel production, while flat steel accounted for 28.7 % of the total.

After increasing by 10 % to 31.3 million tons in 2013, Turkey’s finished steel consumption dropped for the first time since 2009 when the effects of the global financial crisis felt in all areas of the economy. Turkey’s apparent finished steel consumption dropped by 1.9 % in 2014 to 30.74 million tons. While long steel consumption declined by 3.3 % to 16.4 million tons, flat steel consumption dropped slightly by 0.2 to % 14.6 million tons.

On the other hand, Turkey’s flat steel production/consumption ratio reached 71 % in 2014 from 40 % level in 2005. Production/consumption ratio in long products dropped to 159 % in 2014, which was 170 % in 2012. In terms of total finished steel products, Turkey consumed around 85 % of the tonnage produced domestically in 2013.

Export

Turkey’s total iron and steel exports, including the articles of steel and steel pipes was 18.01 million tons down from 18.97 million tons by 5.0 % in terms of tonnage and down by 3.5 % to 15.2 billion USD in terms of value. After dropping 47 % to 1.56 million tons in 2013, Turkey’s total billet export continued to fall further by 69 % to 335.000 tons. Flat steel export increased by 6.4 % to 2.50 million tons with the support of the increasing sales to the EU region in parallel to the recovery in EU economy. Turkey’s long steel export, which is the largest product group that Turkey exports, fell by 2.5 % to 11.03 million tons. In 2014, while long steel products accounted for 61 % of Turkey’s total steel export, share of flat steel was 14 %, tube & pipe products 10 % and semi finished steel products 3 %.

In 2014, Turkey’s total steel export to all regions dropped except the USA. Because of the increasing activity of the Chinese exporters, Turkey’s total steel export to the Middle East and Gulf Region dropped sharply by 20 % from 7.6 million tons to 6.08 million tons. Despite smaller rates, total steel export to EU, North Africa, Far East & South East Asia regions also dropped. Turkey’s total steel export to the North Africa also dropped by 5.5 % to 1.9 million tons. In 2014, EU-28, Middle East & Gulf and North Africa accounted for 61 % of Turkey’s total steel export.

Import

After the sharp growth of 25.4 % in 2013, Turkey’s total steel import in 2014 dropped by 7.1 % in terms of quantity to 13.81 million tons and by 6.1 % in terms of value to 12.04 million tons. Semi finished steel import, which increased by 56 % in 2012 and further 61 % in 2013 to 5.4 million tons, fell by 12 % in 2014 to 4.78 million tons. 2014, Turkey imported around 2.96 million tons of billet and bloom and 1.82 million tons of slab. Although flat steel import dropped by 5.4 % to 6.73 million tons, it continued to stay at high level. Low demand in the global flat steel export markets such as EU, entrance of some countries’ exporters, particularly Chinese exporters, to Turkey’s traditional markets with high tonnages and low priced steel products are some of the factors that kept local production under pressure. Despite two times higher capacity than long steel consumption, Turkey imported 1.5 million tons of long steel products.

In terms of regions, Turkey’s total steel import from the EU and CIS regions, which are the main sources of Turkey’s steel import, showed decreasing trend. Turkey’s total steel import from the EU region fell by 7.8 % to 5.59 million tons. Due to the conflict between Russia and Ukraine import from the CIS dropped sharply by 18.6 % to 5.36 million tons. Because of the sharp growth in Chinese origin steel imports, Turkey’s total steel import from the Far East and South East Asia increased by 38.5 % to 2 million tons.  In 2014, Turkey’s total steel import from China rose by 67 % 1 million ton level.   EU and CIS regions accounted for 79 % of Turkey’s total steel import in 2014.

Steel Trade Balance

Steel products accounted for 9.6 % of the Turkey’s total export in 2014 with its total export value of 15.2 Billion USD. Steel export/import ratio of Turkey increased slightly from 123 % to 126 % in 2014. Despite that growth, steel export/import ratio of Turkey stayed well below its 2012 level of 156 %, which signals that strengthening steel importer position of Turkey.   Turkey’s net steel export rose slightly from 4.1 million tons to 4.2 million tons in terms of tonnage and from 2.9 Billion USD to 3.2 Billion USD in terms of value.

Turkey gave steel trade surplus with all regions except for EU and CIS regions.  Net steel import from the EU dropped from 2.5 Billion USD to 1.84 Billion USD and net steel import from the CIS Region fell from 2.4 Billion USD to 1.84 Billion USD.

Raw Materials

Turkey’s total scrap consumption dropped by 7.3 % to 28.18 million tons in 2014 parallel to the 1.8 % fall in total crude steel and 3.9 % fall in electric arc furnace mill production. While 19.07 million tons of the total scrap consumption met through import down by 3.3% yoy, local scrap consumption fell sharply by 14.7 % to 9.1 million tons. In this respect, share of domestic scrap in the total consumption of the steel industry dropped by 3 percentage points to 32 %. In 2013, Turkey imported 54 % of its scrap from the EU region, 21 % from USA and 19 % from the CIS region. The three regions accounted for 94 % of Turkey’s total scrap import.

In addition to the 7.15 Billion USD worth scrap import in 2013, Turkish steel industry also imported 8.5 million tons of iron ore (1.07 Billion USD), 913.000 tons of pig iron (392 million USD), 437.000 tons of ferro alloys (572 million tons) and 5.5 million tons of coking coal (722 million USD). Total value of steel industry’s raw material import was 9.8 Billion USD in 2013.

Forecasts

Turkish economy started the year 2015 in a climate where uncertainties and vulnerability has shown increasing tendency.  2015 is expected be better than the previous year with the support of the new products and stabilization of the market dynamics. Despite slower rates, growth expectations in the world steel consumption, supports our positive forecasts. In addition, sharp drop in oil prices may have positive effect on the export activities of the steel industry.  In contrast, decreasing oil revenues may limit the investments of oil producing Middle East and Gulf Regions and thus they might decrease their steel consumption and import.

Activity level of the Chinese steelmakers in the international markets and growth path of the Turkish economy are the two main factors that will play a determining role in the development of the Turkish steel industry. Undoubtedly, meeting the increasing domestic demand from the local market is also important for the growth of the Turkish steel industry. It is expected that steel import of the Gulf Region which partly turned to Chinese exporters will back to Turkish steelmakers in 2015 and increasing domestic consumption will mainly be met by local production. In short, 2015 is expected to be a year of uncertainties, where positive and negative factors interact.

Economy

Growth rate in Turkish economy dropped from 8.8 % in 2011 to 2.2 % in 2012. After growing by 4.1 % in 2013, Turkish economy is expected to expand at a slower rate of 2.8 % in 2014. Although inflation rose in 2014, the rate stayed at one digit levels. PPI increased from 7.40 % to 8.17 % and CPI dropped from 6.97<p % to 6.36 %. Unemployment rate also increased to 10.7 % at the end of the year.

As total export of the Turkish economy increased by 3.8 % to 157.6 Billion USD and import decreased by 3.8 % to 242.2 Billion USD with the support of sharp fall in oil prices, Turkey’s total foreign trade deficit decreased by 15 % from 100 Billion USD in 2013 to 84.5 Billion USD in 2013. Narrowing foreign trade deficit helped the balance of payments deficit drop sharply by 30 % from 65 Billion USD to 45.8 Billion USD. Capacity utilization rate of Turkish industry dropped from 76 % to 74.6 % in 2014.

Turkish Steel Producers Association

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