ArcelorMittal, the world's largest steelmaker, and Borusan, one of Turkey's leading steel producers, have today signed a memorandum of understanding (MoU) to jointly invest $500 million in the construction of a new hot strip mill in Gemlik, located on the coast of the Sea of Marmara in northwestern Turkey.
The projected mill, which is scheduled to come on stream in the first half of 2010, will be located next to ArcelorMittal and Borusan's jointly operated Borçelik plant in Gemlik. The new hot strip mill, which will be a 50:50 joint venture, will be designed to have an annual capacity of 4.8 million tons. Half of the production at the mill will be supplied to ArcelorMittal and Borusan companies, 15 percent will be exported, 10 percent will be supplied to the pipe industry, 10 percent will be directed towards Turkish companies operating in general industry and 10 percent will be supplied to the automotive industry. A major part of the $500 million-worth investment will be directed towards machine and equipment. Half of the investment will be financed through the companies' own resources, while the remaining half will be financed through bank credits.
ArcelorMittal will supply slabs to the new hot strip mill, which remains subject to the customary regulatory clearances. The mill is scheduled to come on stream in the summer of 2010 and to reach full capacity in 2012.
In a press release regarding the new investment, Michel Wurth, member of ArcelorMittal's Group Management Board in charge of Flat Carbon Europe, said, "The Turkish steel market is strong and expected to grow at a yearly rate of at least six percent over the next ten years. We at ArcelorMittal are very excited at the prospect of expanding our cooperation with our partner Borusan into the hot rolled coil business. This hot strip mill will offer high grade products, which we believe can be very successful on the Turkish market."
On the other hand, Borusan Holding CEO Agah Ugur said, "Borusan is an experienced and leading steelmaker in the Turkish market. Our cooperation with ArcelorMittal over the past years has helped greatly to develop the Turkish steel industry and economy. Only in August last year did ArcelorMittal and Borusan decide to jointly build a galvanizing line, the third at our common Borçelik plant. Thanks to this cooperation, Borçelik is today the most modern galvanizing facility in Turkey and the leading supplier to the automotive industry. Currently, Turkey imports large volumes of hot rolled coil, and it makes perfect sense to locate such a facility at Gemlik, which has its own port and an ideal industrial layout for such a purpose." Mr Agah also stated that the subject investment will diminish the shortfall in the flats supply in Turkey and also reduce the dependence on imports.
During the press conference concerning the investment which was held in Istanbul on the afternoon of October 22, 2007, Borusan CEO Ahmet Kocabiyik stated that the investment would facilitate the vertical integration of Borcelik and its pipe companies. He added that the fact that the raw material, which its companies currently mostly import, is to be produced in Gemlik would create serious synergy for the Borusan Group. Moreover, Mr Kocabiyik stressed that the investment marks the fourth and the biggest investment they have launched in conjunction with ArcelorMittal (including Arcelor previously), with which they have been in partnership since 1989. Mr Kocabiyik stated that Borusan recorded revenues of $2,351 billion during the 2002-2006 period, with an annual growth of 36 percent, and that they are targeting consolidated revenues of $5 billion by 2010.
During the press conference, it was also stated that local flats production in Turkey is expected to reach four million tons in 2007 (excluding plates) and that the estimated deficit of 4.7 million tons is being met by imports. However, since the industry is expected to grow at least by six percent up to 2010, it is foreseen that this investment will reduce the country's dependence on imports.