After entirely compensating the losses of the crisis period by growing 15 %, production growth in the world steel industry slowed down to 6.8 % in 2011. Compared to the previous years, it is observed that the Chinese effect in the world steel industry growth continued to ease. Chinese steel production growth leveled off to 9-10 % levels during the last 2 years after growing consistently by 20 % in the 2000s.
In comparison to 2010, the production of Japan and Spain dropped, and the growth rate of the USA, India, Russia, Germany, Ukraine, Brazil, and France stayed below the world average. While world crude steel production growth dropped from 15 % to 6.8 % in 2011, Turkey achieved a 2 percentage points higher growth rate of 17 % compared to 2010. With this growth rate of around 2 times higher than the Turkish economy growth, Turkey became the top growing country among the 30 largest steel producers.
Production
Turkey's crude steel production reached a record high of 34.1 million tons in 2011, up by 17 % yoy. Owing to the high production growth performance, which is also the highest among the top steel producers of the world, Turkey's crude steel production surpassed the pre-crisis production of 2007 by 32.2 %. In this respect, Turkey has been the 4th producer in terms of carrying its production beyond the pre-crisis level after China, India, and South Korea. However, it is observed that the production of Spain, France, Ukraine, USA, Japan, Germany, Italy, and Russia has not caught the pre-crisis levels yet.
Turkey's billet production grew by 11.8 % to 24.4 million tons in 2011. With the support of new capacities coming on stream, slab production continued its sharp rise by 33 % to 9.7 million tons after growing by 53 % in 2010.
As new steel production facility investments are all focused on the EAF (Electric Arc Furnace) route, EAF mills accounted for 88 % of the total crude steel production upsurge of 4.96 million tons. While total crude steel production of EAF mills rose by 20.9 % to 25.28 million tons, expansion in the crude steel production of the BOF (Basic Oxygen Furnace) route stayed at 7.2 % to 8.83 million tons.
Capacity
Increasing by 10 % in 2011, Turkey's crude steel production capacity reached around the 47 million tons level, up from 42.7 million tons in 2010. However, the capacity utilization rate, which dropped below the 70 % level in 2009 and slightly improved to 71 % in 2010, recovered to the 76 % level in 2011.
Finished Steel Production & Consumption
Turkey's total finished steel production increased by 21.5 % yoy from 26.30 million tons to 31.94 million tons in 2011. Turkey's total finished steel production growth was higher than the 17 % rise in crude steel production. With the help of new capacities, the highest production growth rate was seen in flat products, reaching 9.08 million tons, up by 36.9 %. Long steel production rose by 16.3 % to 22.87 million tons, up from 19.67 million tons. Long steel products accounted for 71.6 % of the total finished steel production in 2011, while the share of flat steel products was 28.4 %. In 2011, Turkey's total finished steel production grew by 5.64 million tons, and flat steel production growth accounted for 57 % of that expansion.
Turkey's total apparent finished steel consumption was 26.93 million tons in 2011, up by 14.1 % from 23.60 million tons. While total consumption in long steel products, which are generally used by the construction industry, grew by 17.7 % to 13.72 million tons, total consumption in flat steel products, which are generally used by automotive, machinery, and white goods industries, reached 13.2 million tons, up by 10.6 %. In 2011, long steel accounted for 51 % of the total 26.93 million tons of steel consumption, and flat steel accounted for 49 % of the total.
Furthermore, due to the strong production upsurge, Turkey's flat steel production/consumption ratio went up to 69 % in 2011 compared to 40 % in 2005. The production/consumption ratio in long products, which was around 174 % in 2005, dropped down to 167 % in 2011 after touching the highest point of 215 % in 2008.
Turkish Economy
Despite uncertainties in the world economy, social problems in some Middle East countries, and the deepening debt crisis in the EU, 2011 was a year that the Turkish economy caught a high growth rate. Although concerns on the global economic development bother markets from time to time, the Turkish economy kept its position at the forefront among the developing countries and EU economies, due to the high economic growth rate and continued fiscal discipline.
The Turkish economy achieved a 9.6 % growth rate during the first 3 quarters. Inflation completed the year in two-digit rates. The Producer Price Index (PPI) rose by 13.33 % and the Consumer Price Index (CPI) rose by 10.45 %. Accelerated growth helped the unemployment rate to drop to around 9.1 % as of November 2011.
As a result of Turkey's exports reaching 135 billion USD (up by 18.5 %) and imports expanding to 241 billion USD (up by 29.8 %), Turkey's foreign trade deficit soared by 47.7 % to 105.9 billion USD. The sharp growth in the foreign trade deficit caused the expansion of the current account deficit by 61 % to 77.9 billion USD.
Export
Turkey's total iron and steel exports, including articles of steel and steel pipes, reached 18.54 billion USD, up by 5.3 % in terms of tonnage, and by 25.2 % to 16.63 billion USD in terms of value. Turkey's semi-finished steel export dropped sharply by 34.3 % to 2.45 million tons in 2011.
The most remarkable export growth was seen in flat products due to increasing capacity and production, which grew by 51 % to 2.3 million tons in terms of tonnage and by 65 % to 1.94 billion USD in terms of value. Long products export, which is the largest product group that the Turkish steel industry traditionally exports, rose by 14 % to 10.5 million tons and 38 % to 7.36 billion USD. In this respect, while the share of semi-finished products in Turkey's total steel export declined from 21 % to 13 %, the share of flat steel products stepped up from 9 % to 12 % and the share of long products from 52 % to 57 %.
In terms of regions, because of social and political instabilities, the largest export drops in Turkey's total steel products export (excluding articles of steel and steel pipes) were seen in the Middle East and North Africa Regions. Turkey's steel products exports to the Middle East and Gulf Region, which is the biggest export market for Turkish steel, fell by 13.6 % to 6.36 million tons. Exports to the North Africa Region, which had been the second biggest export market for Turkish steel products, declined by 27.5 % to 1.56 million tons, moving the region to the third place among the biggest export markets. In 2011, the EU became the 2nd largest export market for Turkish steel products, with the help of strong first-half performance. Export to the EU rose by 59 % to 2.28 million tons.
Import
Although Turkey's total steel export dropped by 3.3 % to 10.68 million tons in terms of tonnage, the value of imported steel increased by 18.5 % to 11.82 billion USD because of the continued recovery in unit price levels.
Due to the production increase of 37 %, flat steel was the main product group which showed the sharpest import drop. Turkey's total flat steel import declined by 5.9 % to 6.43 million tons in terms of tonnage, but flat steel import value increased by 11.8 % to 6.36 billion USD. Despite being Turkey's largest export product, making Turkey one of the biggest exporters of long products in the world, long product import also rose surprisingly by 13.2 % to 1.36 million tons. In addition to long products, tube and pipe import growth of 21 % to 366,000 tons was another remarkable development in Turkey's total steel import.
In terms of steel product imports by regions (excluding articles of steel and pipe), the EU Region stayed at the top of the list exporting 4.22 million tons of steel to Turkey, followed by CIS countries with 4.13 million tons. The EU accounted for 42.5 % of Turkey's total steel import and the CIS accounted for 41.5 % of the total. In this respect, Turkey realized 84 % of its total steel import from those two regions.
Steel Trade Balance
Turkey's export/import ratio improved from 133 % in 2010 to 141 % in 2011. Turkey's net steel export rose from 6.55 million tons to 7.86 million tons in terms of tonnage, and from 3.31 billion USD to 4.81 billion USD. The steel trade deficit with the EU dropped by 11.4 % yoy to 2.62 billion USD, while the steel trade deficit with the CIS expanded to 2.87 billion USD, up by 10.2 %.
Scrap
Due to the crude steel production growth of 5 million tons in 2011, Turkey's total ferrous scrap consumption also rose by around 5 million tons from 25.26 million tons to 30.79 million tons, up by 22 %. Although Turkey's total crude steel production growth was 17 % and mainly scrap-consuming EAFs' crude steel production growth was 20.9 %, total scrap import rose by just 11.8 %, because of the increase in local scrap production. Despite a sharp rise in consumption, the share of imported scrap in Turkey's total scrap consumption dropped from 76 % in 2010 to 70 % in 2011, allowing local scrap share to increase to around 30 % of the total consumption. The Turkish steel industry consumed 21.46 billion tons of imported scrap and 9.3 million tons of local scrap.
Despite scrap import from the EU region dropping by 6.4 % to 9.9 million tons, the EU kept its position as the largest scrap supplier to Turkey, accounting for 46 % of all scrap that Turkey imported in 2011. Scrap import from the USA rose by 36 % to 5.82 million tons. After the USA, the third-largest country in Turkey's scrap import was Russia, whose scrap export to Turkey grew by 51 % to 2.33 million tons.
Forecasts
Turkey's crude steel production is expected to grow by 11 % to around 38 million tons. Steel consumption is forecasted to rise by 8 %. Planned urban transformation and infrastructure projects are expected to continue supporting Turkey's economic growth and thus steel consumption, despite some slowdown arising from concerns regarding the global economy, which might have a cooling effect on the Turkish economy. New production capacities will not only support the establishment of new industry branches consuming steel products but also provide import substitution.
Depending on new capacities coming on stream and activity levels in the domestic market, steel production has the potential to surpass the expected levels. Shrinking demand in export markets and continued import substitution in flat products are forecasted to continue supporting local sales of the Turkish steel industry. As the Turkish steel industry has the opportunity to utilize its domestic market more efficiently, production growth will not put pressure on the industry, and probable expansions in export markets will support production further. Despite uncertainties in the world economy and slowing demand in the main export markets, steel price levels are anticipated to continue their increasing tendency in 2012, parallel to input costs and demand.