Why did the significant growth observed in Turkish steel output following the 2008 economic crisis start to be replaced by reduced outputs this year? Will this declining trend in output slow down in the remainder of the year?
After 2008, Turkey's steel output saw a gradual improvement and the country registered the best growth rates in crude steel output worldwide, with increases of 17 percent and 5.4 percent in 2011 and 2012 respectively. However, in 2013, Turkish electric arc furnaces reduced production levels due to the contraction in demand, increases in scrap prices starting from January and February not being reflected in finished steel prices amid idled capacities in the global steel industry, and also due to margins declining below $200/mt. In the middle of the year, the US and the EU extended the embargo on Iran to cover semi-finished steel products as well, resulting in a further loss of 500,000 mt in Turkey's steel exports. On the other hand, the strike at Isdemir also caused a production loss of 650,000-700,000 mt and a loss of 1.5-2 percent of the country's total crude steel output. Putting all these factors together, in August Turkey's crude steel output declined by 5.4 percent year on year. The 6.8 percent decrease rate in crude steel output at the beginning of the year had slowed down to 2.9 percent before the Isdemir strike. We had expected this slowdown to continue in subsequent months and to close the year with a stable comparison on year-on-year basis for monthly output. However, all these negative developments and the antidumping duty investigations the Turkish steel industry has faced recently have made the situation more difficult. Making an optimistic forecast, I can say that Turkey will end the year with a 1.5 percent year-on-year decline for monthly output.
What remarks would you like to make on the antidumping investigations?
These duty investigations have clearly got nothing to do antidumping, but are rather aimed at bringing forward protective measures in the guise of antidumping investigations. For instance, there was a 6.8 percent countervailing duty in Egypt. It was a measure implemented to protect their own producers and domestic market. This duty came into effect although Egyptian producers had advantages in terms of labor costs and energy prices compared to Turkey. Egypt's domestic prices are also much higher than those of Turkey. Egyptian producers wanted to further increase their profit margins. It is same for Jordan, Morocco and the US. A profit margin of $70/mt is not enough for a US-based steelmaker because it wants to pay higher dividends to its stakeholders, while Turkish steelmakers are usually family-owned companies which can survive on modest profits. The US producers state, "You are buying scrap from us and produce steel locally, and then sell to the US at prices lower than domestic prices." Yes, we buy scrap from them and process it without any kind state subsidy and sell these products in their country. But they are still not content with their own profits and resort to antidumping duty investigations. Besides, the representatives of US-based mills point out that this is not dumping, it is all about the export volumes and they are trying to limit these volumes.
How do you think the Transatlantic Trade and Investment Partnership will impact the steel industry with the free trade agreement with the EU already threatening the industry?
It will only strengthen the negative impacts of the free trade agreement with the EU on the steel industry. Maintaining the current free trade agreement would be irrational. EU representatives are fully aware of this situation. They should not sign a unilateral agreement with the US if the free trade agreement with Turkey means anything to them. The free trade agreement currently provides the EU steel industry with advantages. Turkey exports one unit while importing two units. While this is not sustainable as it is, it is not possible to expect the Turkish steel industry to take on board the Transatlantic Trade and Investment Partnership as well. The EU should know this.
Would you like to comment on the situation as regards scrap imports?
There has been no decline in Turkish electric arc furnaces' share in total domestic steel production, meaning no decline in our scrap needs. However, when the EAF mills reduce their outputs, this is automatically reflected in scrap imports. Scrap imports are expected to indicate a decrease of around three million mt year on year for the current year. I am happy to say that there has been a six to seven percent increase in domestic scrap generation and this is expected to continue. I believe that importing scrap will be necessary again in line with the increase in production. However, a small decline in scrap demand has strengthened the Turkish steel industry's negotiating power a little in the international market.
