Kardemir: 2019 has been a very busy year for our investments

Friday, 22 November 2019 14:42:45 (GMT+3)   |   Istanbul

We talked to Hüseyin Soykan, the general manager of Kardemir, about current situation and expectations of liquid steel producers.

Can you share some information on your product range and capacity?

Turkey’s first integrated iron and steel plant Kardemir has a diverse product range which has been shaped in line with the market’s needs. Being an integrated iron and steel plant, Kardemir implements desulphurization at its steel mill, converter, pot furnace and vacuum degassing facilities and is capable of clean steel production. Kardemir produces 12-40 mm ribbed rebar at its rolling mill with an annual capacity of 675,000 metric tons. It has a rail profile rolling mill with a 450,000 mt per year capacity and produces heavy sections, flat bars and angles. At Kardemir’s bar-in-coil rolling mill with a 700,000 mt per year capacity, we produce coils, thick coils, round bars and ribbed rebar. With its new plant, where test production is continuing, Kardemir will add capacity for annually producing 200,000 railway wheels, which will be a first in Turkey.

We know that capacity utilization rates have decreased due to the current market conditions. How much do you use of your own capacity?

Integrated iron and steel plants must use their maximum capacity due to their production technology. Kardemir uses all of its liquid steel capacity. After producing 2.4 million metric tons of liquid steel in 2018, Kardemir will increase its liquid steel capacity to 3.5 million metric tons with the ongoing investments in its steel mill, continuous casting plant and blast furnace process.  

How do you view demand in your target sectors?

A serious shrinkage was observed in the rebar market but, following the recent fall in real estate loan interest rates, a significant recovery has been seen in the sector. We believe this development will positively influence steel demand from the construction market. In the automotive sector, overall demand has not indicated a sharp fall due to the higher export volume, despite the rapid decline observed in the local market and also despite the trade wars. The final decision of German giant Volkswagen to invest in Turkey has had a doping effect and reassured the market. Additionally, we are awaiting new announcements in the short term about a local automotive production project. Turkey has become a global brand with its defense industry, which is one of our target markets, and so our efforts to develop new products for the defense industry are continuing. Lastly, we have joined the SAHA Istanbul Cluster Companies, which encourages local firms to produce for our defense, civilian aviation and aerospace industries. We are seeking to increase our support for Turkey’s defense industry by means of this synergy.

In terms of price trends, how do you think 2019 will end and the first quarter of 2020 will start?

As one can see in the markets and also in the SteelOrbis price indexes, prices of flat and long steel products have indicated a significant fall since the beginning of 2019. However, in the past, Turkey’s steel sector successfully overcame several difficult  tests. We believe that, despite the trade wars, the protectionist policies of the EU and the US and the shrinkage of demand in the local market, we will get through the current hardships with minimum losses by finding alternative export markets, adding more value to our products and by increasing our productivity. We also believe that prices are close to hitting the bottom. It will not be a surprise to see an increasing price trend in the short term.

How has the contraction of steel demand in the domestic and export markets impacted your sales?

The contraction in the domestic and export markets has inevitably impacted our sales volumes. However, the flexibility of our production model and our wide product range, including billet, rebar, sections, equal angles, flat bars, rails, bar-in-coil, SBQ and rail wheels, which is the latest product that we have added to our product line, have minimized the impact of the contraction on our sales. We usually prefer to focus on sales of higher-priced products, which also see better demand, in order to continue our activities without any significant deviation from our sales targets. In terms of our strategy for increasing production of value-added products, we are expanding our customer profile each day.

How have safeguard measures, particularly the US duties and EU quotas, impacted your sales and the steel trade in Turkey?

The US duties and EU quotas have hit every market player in the steel industry. The current situation in the market has prompted us to develop new products and to give priority to the sales of value-added products. We also continue to improve our export sales to alternative markets. Besides maintaining or increasing our share in the domestic market, we also aim to strengthen our position in the export markets.

Since the traditional export markets are now closed, to which alternative markets have you directed your sales?

Africa and Asia, in particular, are among our target markets. We also see high sales potential in the Middle East market when the economic and political uncertainties in this region ease. Differing from other market players, our rail and rail wheel production is providing us with a competitive advantage in the global market. We will increase our competitiveness in the export markets by improving the share of value-added products at our bar and bar-in-coil rolling mill.

Are there any new products or qualities that you plan to add or have recently added to your current product range?

By 2023, the 100th anniversary of the proclamation of the republic in our country, our goal is to become the permanent local supplier for the Turkish automotive industry, which aims to make a $75 million profit and has been the main exporting sector in Turkey in the last 13 years by exporting 75 percent of its 4 million unit production volume. As part of this goal, we have created two internal groups, the “Defense Industry Working Team and the “Automotive Industry Working Team”. The mission of these groups is to start and accelerate structural work for collaboration regarding steel products to be used in the given strategic sectors. All types of manganese and boron-added steel used in fasteners, steel products used in vehicle suspension production, steel products for various weapons, bead wire and tire wire are among the products which we plan to produce for these sectors. Besides, we successfully produced different types of grooved rails for the railway industry, deformed wire rod and profiles up to HE 500 dimensions. Based on our current structure and product range, our newly-established research and development center is working on the production of steel qualities which are likely to be used in these sectors in the future.

Could you please share your future plans with our readers?

In 2019, we were very busy in terms of investments. We completed our major projects, including a gas holder investment, construction of a mechanical decanter, modernization of blast furnace gas pipes, modernization of the steel plant charging area and casting area, and of semi-finished and finished steel stock storage areas, construction of a new ladle furnace, and reconstruction of blast furnace No 4. Investments in the new lime factory, in the modernization of our converter, in the continuous casting machine No. 4 with a 1.25 million mt annual capacity and in our rail wheel production mill will be completed next month. In the first quarter of 2020, our 30 megawatt turbo generator, which is an important investment in energy, will start operating. Also, our board of management decided to build a new blast furnace with 1 million mt annual capacity in order to reach 3.5 million mt of steel production capacity per year. We are still in the tender process. In line with our blast furnace investment, the capacity of our convertor will be increased from 90 tons to 120 tons.  These two major investments will lead us to 3.5 million mt of steel production capacity. Besides the investments to increase our production and to add new products to the current product range, the third stage of our environmental investment, worth $50 million, is still continuing.

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