Tatmetal: Export-focused investments undermine competition

Thursday, 10 October 2019 11:07:15 (GMT+3)   |   Istanbul

We talked to Egemen Akbulut, Industrial Sales Group Sales Director of Tatmetal, 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 targeted sectors? 

As one of Turkey’s leading flat coil producers, under the brand of TATÇELİK we supply hot rolled pickled products, cold rolled coil (CRC), hot galvanized coil (HDG) and pre-painted galvanized iron (PPGI) to industries varying from automotive, white appliances, heating and cooling to the manufacturing sector and primarily the construction sector. Meanwhile, TATMETAL, in addition to its domestic sales, is taking firm and rapid steps forward to being a worldwide brand with its export sales to more than 50 countries.  

How do you interpret the current demand from the sector you serve?

In the Global Economic Prospects report of the World Bank, the estimation for global economic growth was reduced to 2.9 percent from the initial 3.0 percent for 2019 and cut to 2.8 percent from the initial 2.9 percent for 2020. Again, in the same report, the World Bank announced that the growth prospect of Turkey was reduced by one point to 3.5 percent for 2018, by 2.4 points to 1.6 percent for 2019, by one point to 3.0 percent for 2020, with a growth prospect of 4.2 percent for 2021. After analyzing the unpredictable impacts of international developments on Turkey’s daily economy, the vulnerable structure of the local market and domestic demand in terms of consumption, it is observed that steel buyers are adopting a strategy to purchase only in line with their needs by means of short-term deals. Meanwhile, the Turkish white appliances sector is Europe’s number one producer with its annual production of 25 million units, and we observe that Turkey exports 75 percent of its white appliance supply to more than 150 countries. According to the data we receive from the producers in the market, we see that they have increased their export rate to 90 percent to ease the impact of the shrinking domestic market. As a result, we consider that the demand from the white appliances sector is higher than the demand received from other sectors. 

The fall recorded in domestic automotive sales has reached over 50 percent. Reports indicate that production in the Turkish automotive sector has fallen by 16.8 percent as compared to the first half of 2018. Due to the unused inventories procured previously, it is observed that companies are ordering lower tonnages. Meanwhile, export sales are still helping the automotive sector to manage its losses to a certain extent. At Tat Metal, our efforts to procure necessary approvals continue as we are motivated to maintain our growth in the automotive sector. 

The situation is no different in the overall manufacturing sector. Companies producing for exports recorded lower losses as compared to last year. Meanwhile, the demand we receive, particularly from our customers in the manufacturing market supplying to the building sector, has significantly decreased.

How do you think HDG and PPGI prices will move in the future?

Consumption in the HDG and PPGI product groups is increasing in Turkey year by year. HDG and PPGI products, which are used by 60 different sectors, include very different criteria for each user sector. Suppliers might offer various prices based on the differences in quality, coating thickness, coating type, width, height and scheduling preferences, and on the supplier. In September and December, seasonal demand and consumption usually increase, while firms ramp up to reach their annual target, turnover and profitability expectations during these months. However, considering the global trade wars, economic indicators and political conflicts, we expect that the increases in prices recorded in recent years will switch to fluctuations in pricing.

In your opinion, what are the main problems in need of resolution facing the galvanized steel sector?

Steelmakers evaluate HDG as a value-added product. We have been observing that, in order for new market players to put their capacities into operation and find their place in the domestic market or to get their brands approved, they put aside cost issues and drag prices down in the market. In a time when these new capacities turn into investments focused on export opportunities though the export markets are decreasing, the fact that domestic market needs are insufficient to provide for these capacities has made competition conditions more challenging for all players.

It is obvious that HDG is not a value-added product just by itself, but that firms who make a difference with production of new qualities and sizes will be one step ahead during these negative market conditions.

Considering the recently increasing protective measures around the world, how do you view the competition for HDG and PPGI in foreign markets?

Due to lower demand, the US and the EU member states have developed new strategies to make it more difficult to reach products which are cheaper in other countries, in order to use their own production potentialities more effectively. Following the additional duties on the products imported into the US from Turkey, Tat Metal focused on the EU market, increasing its PPGI sales especially. However, Turkey did not succeed in being exempted from quotas due to higher volumes of exports made in recent years. 

Towards the closing date of the quota periods, there has been huge competition in the PPGI market and importers in the EU have made significant purchases, taking major advantage of this competition, and this has caused destructive competition in the PPGI market at such times.

How was the first half of 2019 for Tat Metal? What are your expectations for the rest of the year?

Though the overall outlook in the domestic and foreign markets is more negative as compared to previous years, Tat Metal aims to increase production and sales in 2019, in addition to the investments made. Accordingly, we have made our preparations to increase our production and sales target in 2019 by 45 percent year on year. We were in line with these targets in the first six months of the current year. Positive results from our new pickling line, which is the first stage of our tandem line, and from our new galvanizing line launched last year which provides goods for the automotive and white appliances sectors will ramp up our production and sales. We will focus on the trial processes in the automotive and white appliances sectors in order to increase our value-added product range and versatility in the first half of 2019 and in 2020. Reaching our sustainable and recognized quality and supply goals in this sector will be our most significant motivation.


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