Turkish Steel Exporters Association adresses US steel industry
Esteemed members of the steel industry,
I would like to start by giving you some information about the Turkish steel industry. The Turkish Steel Exporters Association has over 700 member companies that are both exporters and producer-exporters. The primary goal of our Association is to increase our export potential and achieve sustainable competitiveness on a global scale with free and fair business practices according to the World Trade Organization’s rules.
Turkey produced 34.7 million tons of crude steel in 2013, which 3.4% less than in 2012. Even so, Turkey maintained its status as the eighth largest steel producer in the world.
Turkey exported 18.4 million tons of steel in 2013, putting it in seventh place for steel exports in the world. In the first 11 months of 2013, Turkey’s finished and semi-finished steel imports increased 19%, reaching 14.5 million tons, while consumption increased 9.6% to 29.6 million tons.
The Turkish steel sector produces goods that fully meet world standards for quality. Our manufacturers are able to produce seismic-grade rebar that meets the B 500 C standard at a 15 to 20% savings on cost. This standard is more affordable in multi-story buildings because it enables the steel reinforcing bars in weight-bearing columns to adhere to the concrete better. The advantages of B 500 C are as follows:
v It is volumetrically more affordable
v It enables the concrete to adhere better to the reinforcing bar
v Narrower columns can be used, which increases the net usable floor space
v And, labor costs are lower
As an example of the demand for high-quality Turkish steel rebar, the Burj Khalifa in Dubai, which is the world’s tallest building at 828 meters, was completely built from Turkish steel. Even though other countries offered prices that were $100 lower than those of Turkish exporters, Turkish steel was chosen because of their confidence in its quality. Furthermore, Dubai, which requires the UK CARES standard, has been importing 95% of its steel rebar from Turkey for many years.
We export Turkish steel to almost 200 countries around the world. We are number one in the world for exports of steel rebar, which we ship to 150 different countries.
According to 2013 export data based on official records, most of Turkey’s steel exports go to the Middle East, with the top three countries being Iraq, Saudi Arabia and UAE. Turkey exported 951 thousand tons of wire rod in 2013, with the most product exported to Libya, Israel and Italy.
Turkey exported 8.2 million tons of steel rebar in 2013. The top three destinations for exports of this product were Iraq, UAE and Yemen.
In previous years, Turkey exported a significant amount of steel rebar to Egypt, but in 2012, local producers there unfairly lobbied for a temporary safeguard measure of 6.8% on steel imported from Turkey, which hurt Turkish exports. When the tariff was lifted in June of 2013 and the court case was settled in our favor in October of 2013, our exports began to return to their previous level. In spite of the political turmoil and pressure from local producers, the Egyptian authorities acted objectively and rightly ruled in Turkey’s favor. While we only exported 77,000 tons of steel to Egypt from January to October, we exported 46,000 tons in November and 89,000 tons in December. In 2014, Egypt will make it into the top three destinations for exported Turkish rebar.
The reasons for our success can be summarized as follows:
- First, we produce high quality products that fully comply with international standards.
- Second, we closely monitor changing technology and use the latest technology to achieve high productivity and low cost.
- Third, we employ qualified, experienced and dedicated personnel at all levels of the steel-making process, which means that we achieve high productivity per person.
- Fourth, we can offer competitive prices with reasonable profit margins while practicing fair trade and competing within WTO guidelines.
- And finally, we have many years of experience in foreign trade, we have proven reliability with our customer, and we fully honor the business contracts we sign.
Another important matter we need to discuss is the issue of anti-dumping investigations. First of all, I would like to say that all Turkish steel companies are for-profit private corporations and that because of the ECSC Free Trade Agreement signed with the European Union, steelmakers have not been able to obtain direct or indirect incentives from the Turkish government since 2001. We oppose countries that practice dumping or sell products manufactured with incentives. We are on the side of countries that are hurt by unfair competition, and we are always ready to fight the sale of such products.
Turkish producers are not against local producers making a profit; however, local producers in some countries are using WTO rules to their advantage and starting investigations when they have no right to do so. Their sole purpose for doing this is to find an easy way to increase their profitability. Those producers know that Turkey does not get subsidies or practice dumping, but they want to take advantage of the fact that exporters and importers can be influenced by an ongoing investigation, which hurts trade between the two countries. This drop in international trade enables local producers to raise prices, which increases their company’s value on the stock exchange.
As you know, the tariff applied by the US on Turkish steel was in effect for over 10 years, from 1997 to 2008. After a delicate and detailed investigation, the International Trade Commission ruled that exports from Turkey would not harm local US producers, so it removed the tariff. We have full confidence that the US authorities will be just as careful in this case and make a correct and fair decision. On the other hand, current tariffs against Latvia, Ukraine, Moldova, Indonesia, China, Belarus, Korea and Poland have been in place since 2001 and if tariffs are levied against Turkey, the world’s largest steel exporters will be completely blocked from selling product to America.
Furthermore, even though anti-dumping duties were lifted for all producers after the Sunset Review in 2008, US imports of steel rebar from Turkey were only 150 to 250 thousand tons from 2009 to 2011. Imports from Turkey made it back up to 574,000 tons for the first time in 2012, which is still less than half of the imports from Turkey in 2006.
If we compare US imports of steel rebar from other countries during the first 11 months of 2012 and 2013, it is evident that there was a 20.1% increase. During that same period, imports from Turkey increased only 14.2%. US imports of wire rod during that same period dropped 21.7%, but imports from Turkey dropped 80.7%. A comparison of all steel imports during that period reveals that US imports dropped 4.4%, while imports from Turkey fell 10.7%. These statistics show that Turkey is doing business according to free trade principles.
The US has had an advantage in its trade with Turkey for many years. For example, in the 18.1 billion dollars of trade between the countries during 2012, the US share was 12.5 billion dollars while Turkey’s share was only 5.6 billion dollars. In addition, Turkey imports 22 million tons of the approximately 32 million tons of scrap that it consumes, and almost 30% of these imports come from USA.
I would like to point out that US producers have a number of advantages over Turkish producers with regard to cost. First of all, they are able to obtain cleaner scrap at lower cost due to the vertical structure of the scrap metal market in the US. Turkish producers have to pay for shipping on top of more expensive scrap metal, so US producers pay $50 less per ton for delivery to the factory. Another advantage is the unit cost of electricity. Because US producers buy electricity at nearly half the cost of Turkish producers, they gain a further advantage of $30 per ton. When we add the export costs incurred by Turkish producers for their products, we find that US producers save another $45 per ton. This adds up to a cost advantage of $125 per ton. If Turkish producers are still viewed as a threat when local producers are starting off with this big of an advantage, the problem may be with the factory size or inefficient operations of US steelmakers, or their desire to obtain very high profit margins. As an example of the difference in factory sizes between our countries, in one ITC hearing a local producer stated that they had annual sales of 25 million dollars and were faced with the threat of having to close down. In comparison, even the smallest steel factory in Turkey has annual sales of at least 300 million dollars.
One advantage that US-based producers have is the Buy America Act. Because this program requires public projects and publicly funded projects to use materials manufactured in the US, local producers do not have to compete with foreign producers in this area.
- At SteelOrbis Rebar and Wire Rod Conference 2014 held in Las Vegas on January 20, one attendee claimed that the Turkish government was giving the producers subsidy. The response by Mr. Ekinci was:
Because of the ECSC international trade agreement, it is simply not possible for the Turkish government to subsidize steel production. In fact, this has been confirmed by the no subsidy finding for Turkish producers in the OCTG countervailing duty investigation and we are absolutely certain that no subsidies will be found in the rebar countervailing duty investigation as well. Instead of providing subsidy, the government actually burdens producers with higher costs because of the taxes it levies. Furthermore, it is quite illogical that Turkish producers would try to take over a global market like the U.S. by dumping their products because they would be unable to sustain such an attempt due to their limited capacity. Data shows that Turkish exports are continually expanding and adapting to the current commercial conditions.
- Another attendee asked, “How do you produce goods for 200 dollars, buying scrap at 400 dollars and selling it for 600?” Mr. Ekinci answered by saying:
Because Turkish steelmakers operate with a very small profit margin and produce goods better and more productively, 200 dollars is enough for us.
Chairman of Turkish Steel Exporters Association