While Turkey’s metals industry may not be globally renowned, its products are a major export and source of revenue. Indeed, a “Made in Turkey” stamp can now be found on everything from the copper wires in NASA spacecraft to the steel pots and pans in many of the world’s kitchens. The sector faces some important challenges, however, in its future development. Sourcing raw materials is one of the chief ones, with moves afoot to boost domestic exploration, as well as to free up supply beyond the current warehouse system.

Meanwhile, exports fell in 2014, with metals manufacturers looking to expand their reach to untapped markets in Africa, South America and beyond. Low demand in the global flat steel export markets such as the EU and the entrance of some exporters to Turkey’s traditional markets with low-priced steel products are some of the challenges faced by Turkish steel producers.

Domestic Capacity

In terms of steel, Turkey’s production capacity increased from 49.04m tonnes in 2012 to 49.6m tonnes in 2013, reaching a level some 35% higher than in 2007, the last year before the global downturn. In 2014 production capacity climbed to 50.2m tonnes, according to the Turkish Iron and Steel Producers’ Association. Some 77% of production in 2014 was done by electric arc furnaces (EAFs), with the most common product steel billets. Some 24.6m tonnes of these were produced, down 6.4% on 2013, while slab production stood at 9.42m tonnes, up 12.7% on the previous year. According to the World Steel Association, the world’s capacity utilisation rate for crude steel production fell to 70.8% in 2014 from 72.4 % in 2013. In line with the global trend, capacity utilisation of Turkey’s steel industry dropped from 70% in 2013 to 68% in 2014.

The dominance of EAFs, rather than blast furnaces, indicates that Turkish steel is primarily reliant on scrap metal – much of it imported – as a raw material. Sourcing this though has been proving increasingly difficult, as countries with their own EAFs have begun limiting their exports of scrap. The EU has also debated introducing limits. Sourcing raw materials is also a growing concern for the aluminium sector. As with steel, the domestic construction boom has added to demand for this material, which was already benefitting from growth in the automotive sector and other aluminium-using industries. The most recent available figures put primary production at around 65,000 tonnes per annum, with Eti Aluminium the sole primary producer. Secondary production does take place, again using scrap. While Turkey has extensive reserves of bauxite, raw materials such as alumina have to be imported, with sector participants concerned that the prices of such materials include too high a premium due to control of the supply chain at the warehouse level by an international monopoly. Istanbul Minerals and Metals Exporters Association (IMMIB) says that its members claim two-thirds of the price of their products is made up of raw material costs. Another challenge is electricity. Electricity, which is a staple of aluminium and copper production and of EAF steel production, is pricey, and its unreliable availability can be a limitation on expansion.

Changing Tack

One way the sector has responded to these difficulties is by boosting the import of ingots manufactured in countries where electricity is cheaper, then using these to make finished or semi-finished products for domestic consumption or export. At the same time, there is increasing interest in exploration within Turkey to try and source more local raw materials. Another response has been to go up-market, producing higher-quality aluminium and steel products for specialist sectors, such as aerospace. These strategies appear to be having an effect. In 2014, according to the IMMIB, aluminium exports were up 7.6%. The expectation is that recovery in Europe and the developed markets will keep business buoyant, with metals exports to the EU accounting for 50% of the total. Turkey has also gained a good reputation in competition against the world’s largest metals producer, China. Turkish metals are known for being better quality, and, while more expensive than China’s metal, they are cheaper than those produced in developed economies.