Overview

Steel Industry in Turkey

Turkey ranks 10th in world's steel production countries and second in Europe. The Iron & Steel industry has become one of the most developed sectors in Turkey and today counts as the third largest contributor to the Turkish economy. Turkey has traditionally emphasized on production of long products, with 81.5 percent of the country's crude steel production allocated to long products, 17 percent to flat products, and the remaining 1.5 percent to special steel products. Turkey produces 71 percent of its steel products from recycled materials. The industry has committed to meeting all EU environmental standards. Turkey is uniquely positioned to be steel supplier of choice to Spain and other European markets. Steelworld team explores

urkey was Europe's third largest producer of steel and 11th in the world ranking of steel-producing countries. The country is a major player in world steel production and exportation with a proven track record of producing quality products to meet market needs, of investing in and expanding flat products production capacity, and developing new technologies.

Initial Days
In July 1996 Turkey agreed with the European Coal and Steel Communities (ECSC) to abolish customs duties on bilateral steel trade. The agreement allowed Turkey to trade its iron and steel products freely with all EU member states. The Turkish steel industry has seen considerable innovations over the past two decades, reflecting a commitment to respond to evolutions in world steel markets. The steel industry in Turkey has witnessed consistent growth over this period, expanding exponentially over the past five years in response to strong world demand for quality steel products. With its long Mediterranean coastline, Turkey is uniquely positioned to service European steel markets quickly and efficiently. The liberalization of economy of Turkey during the 1980s was a turning point not only for the development of the Turkish economy as a whole, but also for the iron and steel industry in particular. The 1980s saw a period of great progress for the Turkish iron and steel industry, which began with the establishment of electric arc furnace mills. Progress has continued unabated, and today Turkey has 18 electric arc furnaces with a capacity range from 500,000 to 2.5 million tonnes (mt), and its integrated plants - Erdemir, Isdemir and

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Kardemir - have capacities ranging from 1.1 to 3 million tonnes. Today all steel production companies in Turkey are privately held, and Turkish steel makers continue to pursue technological developments to enhance long-term viability of the industry in the global marketplace. The Iron & Steel industry has become one of the most developed sectors in Turkey and today counts as the third largest contributor to the Turkish economy. The Turkish iron and steel sector, in existence since the late 1930s, has been growing rapidly, swiftly making Turkey one of the largest producers of crude steel in the world. In 2006, Turkey reached an annual production of 23.3 mt of crude steel, which increased to 25.6 mt in 2007 enough to place it as the 11th largest producer worldwide and third in Europe. According to the Annual Report 2009 issued by Turkish Iron & Steel Producers Association (TISPA), Turkish steel industry has showed a stable growth trend since the year 2001 until the year 2009. Turkey's steel production capacity reached around 38.5 mt in 2009 up to 94 percent from 19.8 million tons in 2000.Despite the financial crisis, Turkish steel industry continued its investments and steel production capacity of the industry in 2009 rose around 4.4 mt compared to 2008. Electric furnace based steel production capacity of Turkey grew by 120 percent from 13.6 mt to 29.9 mt and BOF based production by 37 percent to 8.5 mt during the same period. The new level of crude steel is 78 percent higher than it was in 2001, touching 25.3 mt representing a huge boon for the industry. In 2008, it stood at 26.8 mt but declined 5.6 percent in 2009. However, compared to the other top steel producing countries in the world, the performance of the Turkish steel industry can be accepted as moderate in 2009, which was better than the western world, where huge production drops were seen in many countries, but worse than some of the Eastern Asian countries, where China showed an outstanding performance. Turkey showed the best performance after China and India in 2009 among the world's top 15 steelmaking countries. Since the production of the Turkish steel industry declined less than many other steel producing countries, Turkey moved up to the 10th place in world's largest steel production countries and second in Europe. The basic reason that limited the production loss of the Turkish steel industry was the 23 percent decline in steel imports. In addition to the contraction in the domestic steel consumption, new capacities played an important role in the 23 percent decline of steel import, says the TISPA Annual Report 2009. Turkey steel industry successfully shifted its exports during the crisis period from the Gulf and EU region to the North Africa, Far East and neighbouring countries. Market diversification strategy of the Turkish steel industry which helped to keep the decline in exports to stay at 6.1 percent level, was another important factor preventing larger production losses. Turkey has become one of the largest traders of steel and steel articles. Iron and steel exports accounted for US $15.2 billion in 2007 including crude and all kinds of finished goods. The sector now boasts of over 1,000 foundries and 20,000 employees nationwide, making it a vital component of the Turkish economy. Steel production in Turkey has increased significantly year-onyear since 2001, growing from 14.9 mt in 2001 to 26.8 mt in 2008. In fact, Turkey is the third fastest growing steel producer in the world.

Crude Steel Production Capacity by Products

Flat 26% 2009

Long 74%

Steel Production
Around 70 percent of the total crude steel production of 25.3 mt belongs to electric arc furnace mills and 30 percent to basic oxygen furnace mills. Around 81 percent of the total crude steel production was for

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long products and 19 percent for flat products. In 2009, Turkey's finished steel production dropped by 5.9 percent from 25.1 mt and consumption declined by 16.6 percent to 16.5 mt during the same period.

Investment in Technology
Turkey's growing eminence in the steel world is not just due to the considerable expansion of production, but also to the significant investments made in innovative and state-of-theart production methods and technologies. For example, olakoglu Metalurji has invested in the world's largest and most productive electric arc furnace producing steel from scrap metal. This allows the company to implement an economical mini-mill concept for the production of flat steel products. Similarly, Borcelik Celik Sanayii Ticaret is increasing the rolling and processing capacity of its coldrolling mill complex at Gemlik, which includes the supply of a new reversing mill and galvanizing line as well as upgrading of the existing pickle line. Production has commenced at the steel mill and will allow the company to increase its output of processed products from 900,000 to 1.6 mt per annum.

Domestic Demand
Turkey has also proven to be a good consumer of iron and steel, with consumption up to 18.5 mt a 110 percent increase since 2001. Growth of the industry in Turkey has been driven in part by strong domestic consumption. In the three years from 2005 to 2008 per capita crude steel consumption in Turkey has increased considerably. The recent years have witnessed a strong international demand for steel and Turkey is wellplaced to meet future increases in international demand for steel.

Total Crude Steel Production Capacity

Huge Investments
Production of flat products in Turkey has increased year after year, and in 2008, increased by 6.7 percent. To meet future rising demands for steel, many new investment projects have been announced that will significantly expand Turkey's steelproduction capacity. Due to the new investments, Turkey's slab production capacity i n c r e a s e d drastically by 140 percent in 2008 to 11.3 mt from 4.7 mt in 2007 and to 11.5 mt in 2009. Some c o m p a n i e s producing billets, made investments for the necessary equipment to cast slab at the same facility and capacity. Those companies have the flexibility to switch from one semi-finished product to the other according to the market conditions, says the TISPA Annual Report 2009. Since new slab capacities are not supported by new hot rolling capacities most of the slab capacity were not able to be used effectively. However, with the not hot rolling investments, Turkish steel industry will be able to use the existing slab capacity more effectively in 2010.

Steel Exports
The Iron and Steel Industry is the third largest exporting sector in the Turkish economy and is becoming one of the major forces driving Turkish exports. Turkey is the world's leading exporter of Rebar (reinforced bars), and international demand for Turkish steel products is high. In 2008 the country exported $19.36bn worth of steel products, such as semi products (billet), long-flat, pipe, construction products and appliances, etc. for 19.64 million tonnes, an increase of 70 percent and 21 percent respectively on 2007 figures. Thus the growth in the value of steel exports has been considerably in excess of the growth in volume of steel products, demonstrating the increasing importance in international markets of Turkey's high value-added steel products. In the first five months of 2009 exports of Turkish steel remained high with $4.6 billion being exported, reflecting the continued trend in exporting higher-value steel products. While Turkey's steel exports plunged by 6.1 percent to 18.7 mt in terms of tonnage, the value of exports declined drastically by 41.3 percent to

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US $12 billion. The biggest markets for Turkish steel exports were the Middle East and the Gulf region (37 percent), North Africa (26 percent), SU-27 (15 percent) and Far East (9 percent). Turkey' total steel exports to the EU has been showing a declining tendency since 2007, when Turkey's exports were 6.3 million tons. Turkey's total steel exports to the EU region declined to 4.4 mt in 2008 and 2.7 mt in 2009. Therefore, Turkey's total steel trade balance with EU changed from 1.2 mt net export to 1.2 mt net import during this period. In 2009, while the share of North Africa in Turkey's total steel exports rose from 8.7 percent to 26 percent and Far East rose from 3.3 percent to 9.2 percent, the share of Middle East and the Gulf region declined from 51.1 percent to 36.5 percent and EU-27 region dropped from 21.8 percent to 14.5 percent, says the TISPA Annual Report 2009. Long products represent 63 percent, semi-finished steel mainly billets constitute 13 percent, flat products 9 percent and pipes 8 percent of the total steel exports. Turkey's long products export declined 8.9 percent from 12.9 mt in 2008 to 11.8 mt in 2009. While long product export declined, Turkey 's flat steel production turned its way to the international markets especially during the first half of the year, because of the sharp drop in Turkey's domestic flat steel consumption and increased by 20.5 percent. Of the total long steel exports, Middle East had the largest share with 43 percent followed by North Africa by 31 percent. regions in Turkey's steel imports was around 88 percent, says the TISPA Annual Report 2009. In Turkey's total steel import, flat steel had the largest share with 54 percent, followed by semi-finished products by 35 percent and long products 7 percent. EU was the biggest source in Turkey's flat steel supply with a share of 50 percent followed by CIS region with 36.6 percent. Because of the sharper fall imports that exports, the export-import ratio increased from 136 percent in 2008 to 151 percent in 2009. Turkey's net exports increased from 6.4 million tons in 2008 to around 8.3 million tons in 2009. During the last quarter of 2009, increasing trend in production changed its direction to decline again. The difficulties in getting a balance between high scrap costs and low finished steel product prices, has played an important role in production to begin a new declining tendency.

Future
It is expected that new balance between costs and prices in the world steel markets will be able to be established in 2010 depending on the recovery of the global and Turkish economies. Although expected production growth of around 15 percent in 2010 will compensate the drop of around 5.6 percent in 2009, capacity utilization might stay below the precrisis levels due to the increasing steel production capacity. Since Turkey's steel production increase is a result of the new capacities for flat and structure steel products, where Turkey currently has deficiency, new capacity driven production increase is expected to continue and new capacity investments are forecasted to continue till 2020s. On account of ongoing and planned new capacity investments, Turkey is forecasted to be self sufficient also in the flat products and to have a more balanced production/consumption structure until 2015, says the TISPA Annual Report 2009. In 2010, crude steel production and steel export of Turkey, especially to the neighbouring countries are

Steel Imports
Due to the sharp drop in domestic steel demand and increasing flat steel production capacity enabling substitution of local production with imports, total steel imports of Turkey declined by 23.1 percent in 2009 to 10.4 mt. Main sources of Turkey declined by 23.1 percent in 2009 to 10.4 million tons. Main sources of Turkey's steel imports were CIS and EU region. Total share of these two

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