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Turkish Steel Industry
World crude steel production growth slowed down to its lowest level of 1.2 % since 2009 and increased from 1,529 billion tons to 1,548 billion tons. The growth came mainly from Asia and North America while crude steel production in the EU27 and South America decreased in 2012 compared to 2011. The role of China in world crude steel production rise continued to ease in 2012 as the crude steel production of China increased by just 3.1 % to 717 million tons. Production drops in some regions like EU, CIS, South America has drawn back the world crude steel production growth rate to 1.2 % level. Among the top steelmakers, production of Japan, Germany, Brazil, Ukraine and Italy slumped compared to 2011.
The sharpest production drop in 2012 was in EU 27 due to the downward trend in steel consumption as a result of the continued effects of the debt crisis on the investments and steel demand in the Europe. Crude steel production of the EU which dropped by 4.7 % compared to 2011, stayed 20 % below its production in the pre-crisis period of 2007. In addition to the EU, CIS, North America and South America are the regions which have not been able to reach their pre-crisis levels yet.
Despite production growth in 2012, average capacity utilization ratio of the world steel industry in 2012 declined to 78.8 % compared to 80.7 % in 2011. The declining tendency in the capacity utilization ratio of the world steel industry throughout the year from 80 % level in the first quarter to 73 % in December dragged down the annual capacity utilization in 2012.
Crude Steel Production
Billet played a significant role in Turkey’s crude steel production growth. Turkey’s billet production rose by 10.9 % to 27.05 million tons. Slab production, which grew by 53 % in 2010 and 33 % in 2011 due to the new capacities established, dropped down by 9 % to 8.8 million tons due to the unfavorable conditions in flat steel markets, increasing competition, unfair trade from some of the Far East countries and low quality steel import from some of the neighboring countries. In this respect, share of slab in Turkey’s total crude steel production dropped from 28.5 % in 2011 to 24.6 % in 2012, which means a large part of the capacity kept underutilized in 2012.
While crude steel production of the EAF mills increased by 5.1 % to 25.56 million tons, production growth in the BOF route stayed around 5.6 % reaching 9.33 million tons.
Capacity and Capacity Utilization
Finished Steel Production & Consumption
Turkey’s apparent finished steel consumption reached 28.5 million tons up from 26.93 million tons by 5.6 %. Turkey’s steel consumption growth pace slowed down sharply in 2012 in parallel to the economic activities, after growing at double digit rates in 2010 and 2011. While total consumption in long products which are generally used by the construction industry grew by 7.9 % to 14.83 million tons, apparent consumption in flat steel products which are generally used by automotive, machinery, white goods and shipbuilding industries reached 13.63 up by 3.1 %. Slower growth rate in flat steel consumption compared to the long steels reflects the stagnation in manufacturing industry.
Production/consumption ratio of Turkey in flat products reached 69 % in 2012 from 40 % in 2005. However, the ratio dropped to 66 % in 2012, due to the growth in consumption but drop in production. Production/consumption ratio in long products increased from 166 % in 2011 to 170 % in 2012.
Inflation completed the year at one digit rates again and rise in PPI was at 2.45 % and CPI at 6.16 %. Unemployment rate declined to 9.2 % in 2012 which is 0.6 percentage points lower than 2011 level. Foreign trade deficit of Turkey dropped from 105.9 billion USD in 2011 to 84 billion USD in 2012, down by 20.7 % yoy. Turkey’s total export value grew by 13.1 % to 152.6 billion USD in 2012, while import dropped by 1.8 % to 236.6 billion USD. Sharp drop in foreign trade deficit played the major role in the 37 % contraction at the current account deficit.
Turkey’s total steel export to the Middle East and Gulf Region and North Africa recovered in 2012 partly depending on the stability in the economic, social and political climate of the region. Turkey’s total steel export to the Middle East and Gulf countries increased by 27 % to 9 million tons and export to the North Africa grew by 16 % to 2.1 million tons. While the share of the two regions in Turkey’s total steel export increased from 48 % in 2011 to 56 % in 2012, share of the EU region dropped sharply from 19.9 % to 12.4 %.
When steel import is analyzed in terms of regions, it is clearly seen steel export of the EU to Turkey increased by 16.7 % to 5.2 million tons in terms of tonnage and reaching 5.5 billion USD export value, while EU imported less steel from Turkey. In addition to the EU, Turkey’s total steel import from the CIS region also rose by 9.5 % to 4.6 million tons and import from the Far East & Southeast Asia strengthened by 4.7 % to 1.4 million tons. In 2012, EU and CIS accounted for 83 % of Turkey’s total steel import.
Steel Trade Balance
Turkey continued to have deficit in its steel trade with the EU and CIS regions, despite surpluses in trade with the other regions. In 2012, Turkey’s net steel import from the EU climbed from 1.4 billion USD to 2.4 billion USD and net import from the CIS region gone to the 2.5 billion USD level. Turkey’s total net steel import from the EU and CIS regions reached around 5 billion USD level.
In addition to scrap, which has the highest value among the imported raw materials, Turkey also imported 7.8 million tons iron ore, 1.4 million tons pig iron, 428.000 tons ferro alloys and 4.6 million tons coking coal.
Turkish steel industry, which traditionally exports half of its production, is estimated to export around 22 million tons of steel in 2013 up by 6 %. In 2013, EU market is expected to continue gradual recovery from the low points of activity seen in 2012; partial stability is expected be established in the Middle East region; more steady demand conditions in the Far East region, is expected to support stability in the international markets. Turkey’s steel export to the Middle East and Gulf region is expected to continue growing; export to the countries in Africa and Far East which are specified as the target markets by the Turkish Steel Exporters Union is also forecasted to continue improving.
Success of the efforts to find new outlets for Turkish steel will be one of the most important determinant factors effecting the export performance of the Turkish steel industry in 2013. In this respect, all kinds of activities targeting finding new markets should be actively encouraged and supported. Measures that are in the Action Plans of the Strategy Documents that aim improving the competitiveness of the Turkish steel industry in the domestic and export markets needs to be put into force without any delay.