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Turkey Metals Report Q4 2011
Business Monitor International, Sep 2011, Pages: 49
The Turkish steel industry is growing fast, but this latest Turkey Metals Report from BMI warns that growth in exports will not be sufficient to prevent a slowdown in domestic construction affecting long steel output.
Turkish crude steel output totalled 21.16mn tonnes in the first seven months of 2011, representing an increase of 21.0% year-on-year (y-o-y). Monthly output stabilised at around 3.1mn tonnes throughout most of the period, indicating that the industry was reaching peak performance. Growth in the first few months of 2011 comes on top of 14.6% growth in output to 29mn tonnes in 2010. Output was led by scrap-fed electric arc furnace (EAF) output, which was up 17.8% to 20.9mn tonnes and reversed the declines of the previous year.
Blast furnace output grew 8.9% to 8.2mn tonnes. EAFs continued to lead growth in H111 with output up 29.6% y-o-y to 12.1mn tonnes while iron-fed blast furnace output grew just 2.8% y-o-y to 4.3mn tonnes. According to the provisional data released by the Central Bank of the Republic of Turkey, the capacity utilisation rate in the Turkish basic metal manufacturing industry was 78.2% in August 2011, increasing by 3.8 percentage points (pp) against August 2010 and remaining unchanged compared with the previous month.
Production has been bolstered by the opening in October 2010 of Russian-owned MMK Atakas's US$250mn cold rolling facility, which has a 1.2mn tpa continuous pickling line, 750,000 tonnes per annum (tpa) reversing mill, 450,000 tpa hot dip galvanising unit and 200,000 tpa colour coating line.
By the end of 2011, the commissioned cold rolling shop is scheduled to reach its planned capacity of 750,000 tpa of ready-made metal products. When completed, MMK Atakas's sites in Iskenderun and Istanbul will have a total hot rolled flat production capacity of 2.3mn tpa, following total investment of around US$1.7bn.While MMK Atakas has improved output by up to 200,000 tonnes per month, there were expectations that output from other producers would lead to higher rates of growth.
There is a danger of a fall off in demand from the construction sector that could hamper domestic demand growth in long products. The outlook within the construction industry is increasingly pessimistic. This will hold back long steel consumption and the industry will be increasingly dependent on growth in export markets, principally the Middle East.
For the first seven months of the year, the country's total steel product exports reached 10.74mn tonnes while the revenue generated by these exports amounted to US$8.99bn, increasing by 8.64% and 31.06% respectively y-o-y. BMI forecasts total exports of 17.87mn tonnes for 2011, up 10.1% y-o-y, which will reverse most of the losses over the previous two years and should make up for any softening of domestic demand for long steel.
In June 2011, General Secretary of the Turkish Iron and Steel Producers' Association Veysel Yayan suggested that steel billet capacity could rise to 42mn tpa by 2015, up from 35.4mn tpa in 2010, and that the country's slab output capacity may rise to 20mn tpa from 13.4mn tpa. He estimated output figures of 35.4mn tonnes of billet and 15.9mn tonnes of slab for 2011, marking increases of 62% and 118% y-o-y respectively.
BMI believes Yayan's forecasts are unrealistic, given the rate of growth in the January-July period and the pace of capacity growth. Crude steel production is expected to total 33.79mn tonnes in 2011, growing 16.5% y-o-y, increasing to around 47mn tonnes in 2015, a 62% rise on 2010 levels.
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