Turkish steel industry has been showing a stable growth trend since the year 2001. Turkey’s crude steel production capacity reached around 34.1 million tons in 2008 up by 72 % from 19.8 million tons in 2000. Electric furnace based steel production of Turkey grew by 91 % from 13.6 million tons to 26.1 million tons and BOF based production by 30 % to 8 million tons during the same period.
Turkey’s total crude steel production increased from 14.3 million tons in 2000 to 26.8 million tons in 2008, up by 87 %. In this period, Turkey showed the best performance in the world after China. Furthermore, the growth performance of the Turkish steel industry was around two times higher than the general Turkish economy. Because of the high performance of the Turkish steel industry, Turkey moved up to the 11th place in world’s largest steel producing countries and to 3rd in Europe.
Turkey’s finished steel production increased by around 87 % from 14.2 million tons in 2000 to around 26.7 million tons in 2008 and consumption rose by 62 % to 21.3 million tons during the same period.
Turkey’s main export destinations of steel products are Middle East – Gulf Region, EU and North Africa. Major import sources are CIS Region, EU and Far East. Turkey has negative trade balance with CIS, EU and Far East Region.
While 76 % of Turkey’s exports are composed of long products, 56 % of its imports are flat products. Turkey’s imports of semi finished steel has been showing an increasing tendency due to the barriers applied by some countries to scrap export such as Russia and Ukraine, where producers can buy scrap cheaper than the Turkish steelmakers, because of the export restrictions.
The basic developments in the Turkish steel industry during the year 2008 can be summarized as follows:
• Turkey’s crude steel production capacity increased by 7 % in 2008 to around 34.1 million tons.
• Turkey’s slab production capacity increased by 140 % in 2008 to 11.3 million tons from 4.7 million tons in 2007. Some companies producing billets, made investments for the necessary equipment to cast slab at the same facility and capacity. Those companies have the flexibility to shift from one semi finished product to the other according to the market conditions.
• Finished steel production grew by 2.3 % in 2008 to 26.7 million tons.
• Turkey had the highest production increase in 2008 among the world’s top 15 steelmaking countries.
• Because of the strong first three quarters, Turkey’s total steel exports increased by around 22 % to 16.8 million tons, despite of the falling demand in the last quarter of 2008.
• Middle East and Gulf countries was the main export destination with a share of 58 % in Turkey’s total steel exports, followed by EU region having the share of 16 %. In 2008, Turkish steel producers diverted their exports from EU to the Middle East-Gulf Region. Compared to 2007 level, while the share of EU in Turkey’s total steel exports declined from 33 % to 16 %, the share of Middle East and Gulf Region increased from 44 % to 59 %.
• Long products represented 76.4 % and semi finished steel, mainly billets, 14 % of the total steel exports.
• Due to the drop in domestic demand and increasing flat steel production capacity enabling substitution of local production with imports, total steel imports of Turkey declined by 2.9 % in 2008 to 12.8 million tons. Main sources of Turkey’s steel imports were CIS and EU region. Total share of these two regions in Turkey’s steel imports was around 88 %.
• Because of the fall in imports and growth in exports, export/import ratio increased from 84 % in 2007 to 116 % in 2008.
• Turkey’s net exports increased from 0.5 million tons in 2007 to around 4 million tons in 2008. In terms of value, Turkey shifted from net steel trade deficit of around 1.5 billion USD in 2007 to net trade surplus of 2 billion USD in 2008.
Global steel markets peaked at the end of the first half of 2008 and started to slow down after August 2008. The global financial crisis emerged in October accelerated the declining tendency in steel demand and prices, which had destructive effect on world and Turkish steel industry. The crisis situation has dramatically changed the growth prospects of the sector.
• Crude steel production increased by 11.9 % during the first 8 months of 2008. However, due to the sharp production drops in the last quarter of the year, the increase in Turkey’s steel production in the whole of 2008 declined to 4.1 % and total crude steel production reached 26.8 million tons.
• In December 2008, Turkey became the 9th largest steel producer in the world and 2nd in Europe, because of the sharper production cuts in Brazil and Italy.
• With the drop in the steel demand of the Gulf Region, Turkish steel exporters followed market diversification strategy and focused on neighbor countries such as Egypt, Iraq and Saudi Arabia.
• Turkey’s monthly steel export value declined by around 60 % during the last three months of 2008 from USD 2.5 billion to around USD 1 billion compared to the summer months of 2008.
• During the last quarter of 2008, steel demand and prices declined drastically both in domestic and international markets. Long product prices declined from USD 1500/ton level to USD 400/ton level in such a very short time that it damaged steel producers worldwide.
• In addition to the uncertainty in the market outlook, due to the steep decline in crude steel production and extreme fluctuations in scrap prices during the last quarter of 2008, Turkey’s scrap imports increased by just 1 % to 17.4 million tons.
• Because of the sharp and fast decline in raw material and finished steel product prices and demand, steel producers faced with very high loses. With the fast decline in prices, uncertainty in the market and collapse in demand, there has been many contract cancellations in raw materials and finished steel orders, which also damaged the confidence to the market and trade relations.
• Domestic consumption declined by 10 % from 23.7 million tons to 21.3 million tons. Decline in long product consumption was the sharpest with 16.1 %.
• Crude steel consumption per capita fell from 358 kg in 2007 to 319 kg in 2008.
• Sharp drops in oil prices and freight rates made it easy for Chinese origin steel to enter in both Turkish domestic market and export markets, which was an important challenge for Turkish steel exporters.
• Some projects for flat steel production has been delayed due to the financial crisis. But most of the ongoing projects will be completed though they are expected to be behind the schedule.
Since the privatization of the government share at İsdemir in 2001, Turkish steel industry has been 100 % private sector. In this respect, Turkish steel industry reacted very fast by cutting the production to the sharp slowdown of demand during the last quarter of 2008 resulted from the global financial crisis. It is the dynamism of the Turkish steel industry that made it easy to adopt itself to the new situation both in the domestic and export markets. In response to the rapid deterioration of the steel markets, the basic measures that Turkish steel industry has taken can be summarized as follows:
• Turkish steel industry started to cut its production around 30 % compared to the summer months since September 2008. Turkey’s crude steel production declined by around 30 % from 2.5 million tpm during the summer months to 1.75 million tpm beginning from the last quarter of 2008.
• Shifts eliminated during the parts of the day such as evenings, when electricity costs are higher.
• Some companies stopped their production completely and made the maintenance work during this period.
• In parallel to the production drops, redundancies are observed in sector and priority was given to contractor workers in cutting jobs.
Despite the negative effect of financial crisis on new capacity investments, flat steel production capacity is expected to continue to increase in 2009 as well, which will effect total steel production positively. It is expected that Turkey’s steel production will decline in the first half of 2009 and depending on the recovery on the global economy it might start increasing during the second half of this year. Despite that Turkey’s crude steel production and consumption are expected to decline more than 10 % in 2009.
In parallel to the slowdown in the domestic market, steel imports likely to continue to show declining tendency in 2009 and export/import ratio expected to improve from 116 % in 2008. Flat steel investments will also play an important role in declining imported steel requirements and Turkish domestic market will increasingly meet its needs from the local producers instead of importing.