We talked to Kerem Çakır, Borçelik General Manager, about current conditions and outlook for the coated steel industry for the special report section for our Prime magazine.
What are your standard products and end markets?
We were established in 1990 as the first flat steel producer in Turkey. After the investments we made in 1994, 2003 and 2008 which totaled $530 million, we have increased our production capacity to 1.5 million metric tons. Currently, we are operating three cold rolling and three hot dip galvanizing lines, which makes us the highest quality galvanized steel producer in Turkey with 900,000 mt of galvanizing capacity.
A dynamic workforce, a modern approach, continuous investments in growth and development, customer-oriented service and understanding of quality lie at the core of the strong position of our company in the market, while we continue to operate in partnership with the steel majors ArcelorMittal and Borusan Holding.
Our Gemlik plant located on 240,000 square meters of land, which is strategically important, produces hot dip galvanized steel, cold rolled steel and hot rolled steel (pickled and oiled). We produce merchant bar, rolled steel, deep drawing steel, extra deep drawing steel, dual phased steel, rephosphorized steel, HSLA steel, high carbon steel, enameling steel and structural steel via high technology procedures.
We supply crucial raw material inputs for the leading sectors which contribute most to our exports, including the automotive, white appliance, heating/ventilating, building and construction, and machinery sectors. Looking at the sectors to which we supply services, we see that most of the brands we work with are exporters. Accordingly, at Borcelik we see ourselves as not only domestic market suppliers, but also as an enterprise which has a mission to support Turkey’s exports.
We supply steel sheet for American light commercial vehicles and European automobiles, in addition to offering solution partnerships to a lot of major automotive firms, including Fiat, Renault, Ford, Toyota and Mercedes Benz. We are the first producer in Turkey of steel sheet used in automotive outer surfaces, thanks to the Extragal galvanizing technology offered by our partner ArcelorMittal that we use in the production of steel sheet for visible automotive surfaces. With this technology, Borcelik supplies industry input in accordance with EU standards to the automotive sector, while reducing Turkey’s dependence on foreign markets for these products.
How is demand in your end markets?
Having 1.5 million mt of production capacity under the Borcelik brand and 500,000 mt of metal processing capacity under the Kerim Celik brand, our company has the largest galvanizing capacity in Turkey with a product range of the highest quality.
2018 was a difficult year for the Turkish steel industry due to the trend of increasing protectionism in the global market and due to the fluctuations in the Turkish lira-US dollar exchange rate beginning from the second half of the year. The new trade barriers imposed by the US and the EU negatively impacted our sector which already had an oversupply problem. Standing out among others with the support of our strong competitiveness, we succeeded in carrying our strong sales performance in 2017 over to 2018 despite all the negativity in the market.
Regardless of the protectionism trend in the US, in 2018 Borcelik took a 19 percent share of Turkey’s cold rolled and galvanized coil exports and continued to support the national economy. Since our customers are mostly focused on exports, demand for our products from strategic sectors was at expected levels despite the economic problems in the country beginning from the second half of the year.
What is your expectation for HDG and PPGI prices in the coming period?
It is getting more difficult for us to forecast the tendency of prices as they are always changeable depending on raw material prices, the policies of countries, and trade wars. While global economic growth is expected to slow down in the coming years, what goes on in China in terms of domestic steel consumption, economy policies and its trade war with the US are among the issues which need to be followed in the coming period.
What are the main problems of the Turkish galvanized steel sector which need to be resolved?
In the Turkish steel industry, we need to produce value-added products at competitive costs. However, part of the installed capacity and the new investments are not intended for value-added steel production. Our galvanized steel industry is searching for high quality, value-added and competitive flat steel feedstock to compete in the global market and is still importing to meet its needs. Viewing the flat and long steel markets separately, Turkey is a net importer of hot rolled, cold rolled and galvanized steel, while it is a net exporter of rebar and of light, medium and heavy sections.
In recent years, investments in the Turkish flat steel industry have increased, resulting in a demand-supply imbalance. Since there are further investments on the horizon, this imbalance of supply and demand is expected to intensify in the coming period. Our biggest wish is to see demand for flat steel in the domestic market improve and catch up with supply. We also need to improve our direct export tonnages significantly. If the current imbalanced structure of our flat steel market continues, the gap between production and consumption will widen in the coming period and pose a more severe threat to our industry.
How do you interpret the competition in the international HDG and PPGI markets against the backdrop of the widespread safeguard measures?
The steel market has been influenced by the safeguard measures and the slowdown observed in Turkey’s economy in 2018.
Safeguard measures were increasing over recent years and reached a peak in 2018. After the initiation of Section 232, which imposed 25 percent duty on steel imports, the US increased the duty to 50 percent on steel imports from Turkey. This was an unexpected development for the Turkish steel market, and so the second half of 2018 was quite hard for Turkey. Despite the US decision to cut the Section 232 duty on Turkish steel back to 25 percent again in May 2019, market conditions were different and so the competition in the US market increased. With the EU’s import quotas initiated after the US Section 232 investigation, safeguard measures in Turkey’s important export markets increased. Meanwhile, the rise in the CRC and HDG capacities of Turkish flat steel producers over recent years had increased their need to conclude export sales. This need became a necessity following the sharp fall observed in domestic demand amid the economic slowdown which started in the second half of 2018 due to the volatility of the Turkish lira. On the other hand, despite the safeguard measures, the Turkish steel sector had found alternative markets and achieved record exports in 2018.
How was the first half of 2019 for Borcelik? What are your expectations for the rest of the year?
As a part of our vision, we plan to remain the number one flat steel solution supplier in the key sectors in target regions by boosting our competitive advantages such as customer intimacy, productivity and creative solutions.
We valued growth in volume during previous years, but in 2019 we will increase the share of value-added products in our portfolio with a cost-oriented stance, apart from the growth we want to see in terms of volume due to the shrinkage in our domestic market.