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Turkish Steel Industry in 2013

World crude steel production reached 1,607 billion tons % in 2013 up by 3.1 % yoy, after growing 1.5% in the previous year. The production growth pointed out continued recovery in the world steel markets. However, when the growing role and share of Asia and China in the world steel production considered, it is clearly seen that the improvement in the world steel markets was resulted from Asia region. In 2013, crude steel production of China increased by 6.6 % to 779 million tons; and production of Asia reached 1,081 billion tons up by 5.3 %. When the production of China excluded, world crude steel production stayed stable at 828 million tons. It is calculated that world crude steel production excluding Asia fell by 1.3 %.   In contrast to strong expansion in the production of Asia, production dropped in all other regions including EU-28, Other Europe, CIS, North America and South America.

Compared to the pre-crisis level of 2007, total crude steel production of the EU is down by 21 %, CIS is down by 12 %, North America is down by 10 % and South America is down by 4.6 %. Although production is lower than 2007 level in many regions, China’s 2013 production is 59 % higher and Asia’s production is 43 % higher in the same comparison, which brings world crude steel production up 19.2 % over 2007 level. While world crude steel production increased by 19.2 % during the last 6 years period, world steel production excluding China dropped by 3.6 % and excluding Asia down by 10.7 %. The sharp drop in world crude steel production excluding Asia and China reveals the determining role of the region in the world steel production growth. According to the production figures in 2013, EU region is the one which has at the lowest level compared to the pre crisis, whose production dropped from 210 million tons to 166 million tons.

China, with its production of 779 million tons up by 6.6 % yoy, kept its position as the largest crude steel producing country in 2013. After China, which accounted for 49 % of the global steel production, Japan ranked as the second largest steel producer with its 111 million tons of production and USA ranked third with its production of 87 million tons. Despite dropping by 3.4 % to 34.65 million tons, Turkey kept its position as the 8th largest steel producer of the world. In spite of being the first country in terms of production growth rate among the top 10 steel producing countries in the years 2011 and 2012; and third country after China and India during the last 10 years period, Turkey became the second country to show the worst performance after South Korea in 2013.

Crude Steel Production
Turkey’s crude steel production growth has shown slowing tendency since 2011 Turkey has entered the year 2013 with the expectation of production rise. However, narrowing margins between scrap and finished steel products negatively affected Turkey’s competitiveness and production. In addition, electricity cuts adversely affected the crude steel production of the steel industry in December, which showed some recovery during the first months of the fourth quarter.

In the whole of 2013, despite growth expectations, Turkey’s total crude steel production dropped by 3.4 % to 34.65 million tons, negatively separated from the world. Turkey’s billet production fell by 2.8 % to 26.3 million tons and slab production went down by 5.3 % to 8.36 million tons. Slab production, which increased at record rates in the years 2010 and 2011, continued to drop in 2013 after the 9 % fall in 2012. Crude steel production of the EAF mills dropped by 6.9 %, while production of the facilities with BOF technology increased by 6.5 %.   In 2013, billet accounted for 76 % of the total crude steel production in terms of products and EAF mills accounted for 71 % of the total.

Despite the drop in 2013, Turkey’s crude steel production is 35 % higher than pre-crisis level in 2007. Turkey’s production growth during the last 6 years is 80 % higher than the world average. With its production growth performance of 35 %, Turkey comes as the third country among the top 10 steel producers after China, up by 61 %, and India, up by 49 %.

Capacity and Capacity Utilization
Turkey’s crude steel production capacity reached 49.6 million tons in 2013, up slightly by 1.2% from 49.04 million tons in the previous year. Share of the electric arc furnace mills in the total capacity reached 76 % level. Despite some slowdown, increasing tendency in crude steel production capacity and drop in production resulted in 3 percentage points fall in capacity utilization rate. According to the World Steel Association figures, capacity utilization rate in the world crude steel production increased to 78.1 % in 2013 from 76.2 % in 2012. In contrast to global trend, capacity utilization of the Turkish steel industry went down from 75 % in 2012 to 70 % in 2013, which is 8 percentage points lower than global average. In slab production, the capacity utilization rate fell from 56 % to 53 % level. In addition to the negative effect of the increasing raw materials prices on the competitiveness of the industry, high levels of slab import which soared by 141 % led almost half of the slab capacity stay idle.

Finished Steel Production & Consumption
Despite the drop in total crude steel production, Turkey’s finished steel production grew by 6.2 % to 36.4 million tons in 2013 with the support of 61.4 % rise in semi finished steel products. In this respect, finished steel production was higher than crude steel production for the first time in 2013. Long steel production reached 26.54 million tons up by 5.1 % and flat steel production reached 9.9 million tons up by 9.2 %. Long steel accounted for 72.9 % of the total finished steel production, while flat steel accounted for 27.1 % of the total.

Turkey’s finished steel consumption reached 31.3 million tons up by 10 % which can be considered comparatively a high rate on the world average. Long steel consumption rose by 12.3 % to 16.67 million tons and flat steel consumption increased by 7.4 % to 14.63 million tons.

On the other hand, Turkey’s flat steel production/consumption ratio reached 67 % in 2013 from 40 % level in 2005. Production/consumption ratio in long products dropped to 159 % in 2013, which was 170 % in the previous year. In terms of total finished steel products, Turkey consumed around 86 % of the tonnage produced domestically in 2013. In this respect, Turkey produced more steel than its consumption and structurally net steel exporter.

Economy
Growth rate in Turkish economy dropped from 8.8 % in 2011 to 2.2 % in 2012. Turkish economy is expected to grow at around 4 % in 2013.

Although inflation rose in 2013, the rate stayed at one digit levels. At the end of the year, PPI and CPI increased to 6.97 % and 7.4 % respectively. Unemployment rate was 10 % at the end of the year.

As total export of the Turkish economy dropped slightly by 0.4 % to 151.8 Billion USD and import increased by 6.4 % to 251.7 Billion USD, Turkey’s total steel trade deficit increased by 18.7 % from 84.1 Billion USD in 2012 to 99.8 Billion USD in 2013. High growth in foreign trade deficit resulted in sharp rise in Turkey’s current account deficit which is considered as the most fragile part of the Turkish economy. In 2013, current account deficit of Turkey, increased by 36.1 % (17.3 Billion USD) from 47.8 Billion USD to 65 Billion USD. 

Export
Turkey’s total iron and steel exports, including the articles of steel and steel pipes was 19.0 million tons down from 20.3 million tons by 6.3 % in terms of tonnage and down by 7.8 % to 15.8 billion USD in terms of value. While total billet export dropped by 47 % to 1.56 million tons, flat steel export increased by 27 % to 2.36 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 3.3 % to 11.3 million tons. In 2013, while long steel products accounted for 60 % of Turkey’s total steel export, share of flat steel was 12 %, tube & pipe products 10 % and semi finished steel products 8 %.

In 2013, EU was the only region where Turkey’s steel export tonnage increased, which grew by 30 % to 3.3 million tons as a result of the increasing activity in the EU steel using sectors. Export to the Middle East and Gulf Region, which is the largest export destination for Turkey’s steel products, plunged to 7.58 million tons down by 15.4 % and export to the North Africa was 2 million tons, which is 4.7 % lower than 2012 figure. In 2013, EU-28, Middle East & Gulf and North Africa accounted for 67 % of Turkey’s total steel export.

Import
As a result of the falls in Turkey’s crude steel production and export, Turkey’s total steel import increased sharply by 25.4 % to record high levels of around 14.86 million tons in terms of tonnage and to 12.82 Billion USD up by 14.1 % in terms of value. After growing 56 % in 2012, Turkey’s semi finished steel import increased further by 61 % in 2013 and reached to 5.4 million tons. Because of the negative effects of the narrowing margins between scrap and finished steel products, Turkey’s slab import increased by dramatically in 2013 by 141 % to record high levels of 2.3 million tons. Despite almost half of Turkey’s flat steel capacity stays idle, total flat steel import rose by 10.4 % 7.1 million tons. In spite of some recovery in flat steel export, growing trend in flat steel import, and some countries’ export to Turkish market at dumped prices kept Turkey’s production under pressure. Despite two times more 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 kept increasing trend putting Turkey’s steel production under pressure. Turkey’s total steel import from the EU region reached 6.06 million tons up by 16 % yoy, import from the CIS reached 6.6 million tons up by 39 % and import from the Far East & SE Asia to 1.5 million tons.  EU and CIS regions accounted for 85 % of Turkey’s total steel import in 2013.

Steel Trade Balance
Steel products accounted for 10.4 % of the Turkey’s total export in 2013 with its total export value of 15.8 Billion USD. As a result of export drop and sharp growth in imports, steel export/import ratio of Turkey declined from 153 % to 123 % in 2013. The drop in semis and finished steel export and sharp increase in imports, played the major role in 30 percentage points decline in steel export/import ratio. Turkey’s net steel export dropped from 8.4 million tons to 4.1 million tons in terms of tonnage and from 5.9 Billion USD to 3.0 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 increased from 2.4 Billion USD to 2.5 Billion USD and net steel import from the CIS Region rose from 1.7 Billion USD to 2.4 Billion USD.

Raw Materials
Turkey’s total scrap consumption dropped by 6.1 % to 30.4 million tons in 2013 parallel to the 3.4 % fall in total crude steel and 6.9 % fall in electric arc furnace mill production. While 19.73 million tons of the total scrap consumption met through import down by 12% yoy, local scrap consumption rose by 7.4 % to 10.7 million tons. In this respect, share of domestic scrap in the total consumption of the steel industry rose by 4 percentage points to 35 %. In 2013, Turkey made 54 % of its scrap import from the EU region, % 26.2 % from USA and 10.4 % from Russia. The three regions accounted for 90 % of Turkey’s total scrap import.

In addition to the 7.5 Billion USD worth scrap import in 2013, Turkish steel industry also imported 8.2 million tons of iron ore (1.16 Billion USD), 983.000 tonnes of pig iron (414 million USD), 419.000 tonnes of ferro alloys (550 million tons) and 5.1 million tons of coking coal (811 million USD). Total value of steel industry’s raw material import was 10.4 Billion USD in 2013.

Forecasts
Competitiveness of the steel industry, trend in domestic demand, rate of recovery in the export markets and import restrictions against our products will play a significant role in determining the performance of the steel industry in 2014. However, in general it is expected that Turkey’s crude steel production will increase by 8 % to 37.4 million tons and  export by 8 % to 20.5 million tons level. Steel import which saw a sharp increase in 2013 is anticipated to fall by around 6 % with the support of import substitution and increasing competitiveness of the Turkish steel industry. Turkey’s total apparent finished steel consumption is forecasted to reach 33 million tons level, moving up by 6 %, after the strong 10 % growth in 2013. In addition to the other factors, eliminating the additional funds and burdens on steel industry that damage the competitiveness of the industry will be the one of the key determining factors in shaping the performance of the industry in 2014.