Dr. Veysel Yayan, secretary general of the Turkish Iron and Steel Producers’ Association, spoke to SteelOrbis about 2019 and his expectations for 2020:
2019 was a difficult year for the steel sector, as was 2018. After President Trump’s decision to double the Section 232 duties on steel imports from Turkey from 25 percent to 50 percent in August 2018 and his steps that contributed to financial difficulties in Turkey, domestic steel consumption in Turkey declined by 38 percent in the second half of 2018 as the uncertainty which surfaced in the Turkish economy negatively impacted industries such as consumer durables, automotive and housing. Thanks to the positive consumption performance displayed in the first half of the year, the fall of consumption observed in the second half of 2018 was reflected as a 14.9 percent decline for the full year of 2018. However, our steel sector found the opportunity to compensate for losses in domestic steel consumption with its exports that increased 50 percent in the second half of the year and by 20.5 percent overall in 2018. As a result, in 2018 the fall in steel production was 0.6 percent, while 37.3 million mt of crude steel was produced.
The downtrend of domestic steel consumption which started in the second half of 2018, deepened in the last quarter and continued in 2019. This decline was expected to be balanced by precautionary measures anticipated after the elections. But the repeat of the elections in Istanbul caused a postponement of the implementation of economic stability measures and of measures aimed at generating new economic balances. By the virtue of the measures implemented as of the second half of the year, it was observed that uncertainties gradually diminished, with steel consuming industries’ indicators starting to follow a positive trend in markets such as white appliances, automotive and construction.
With the improvement of consumption in the second half of 2019, the decline in consumption which had reached 43 percent in the first months of the year started to decrease. In addition to the positive developments in consumption, our exports increased both in quantity and value in the first half of 2019, influenced by the lower numbers recorded in the first half of 2018. However, as compared to the second half of 2018, exports in 2019 started to decline.
The Turkish steel market tried to compensate for the fall recorded in export sales with the improvement in domestic demand. But this improved domestic demand failed to stop the reductions in production rates caused by increasing imports in recent months. Under today’s conditions, the quest to find new export markets has gained importance due to protectionist measures. Steps have been taken in this direction and these efforts are expected to continue in 2020.
Protectionist measures have caused several other countries to increase their duty rates on steel products or to impose various measures of their own. While this situation, on the one hand, has complicated exports to those countries with protectionist policies, on the other hand it has enabled producers in countries with higher capacity utilization rates to focus on the international markets, which has started to negatively impact our exports. Countries all over the world have implemented measures to protect their steel industries and in 2019 alone 101 protectionist measures, antidumping and countervailing duties were imposed or investigations were started. The lack of a concomitant measure in Turkey to protect our completely defenseless steel industry has caused discomfort in the sector.
Despite the serious fall in consumption, the continuous increase of the share of imports in domestic consumption has caused some capacities - which were generated by recent investments - to be idled and new investments to be postponed. All these developments are causing production and, correspondingly, capacity utilization rates to fall in our country. The Turkish steel industry needs to compensate for its losses in crude steel production which amounted to 10 percent in the first 11 months of 2019 and to hastily return to the capacity utilization rates recorded in 2017, as this is of great strategic importance for Turkey’s economy, which in 2020 employs approximately 300,000 workers directly or indirectly.
Our steel sector is doing its fair share of work to reach these targets, is diversifying its products and accelerating its operations to produce value-added materials.
Despite the rises observed in the recent months, we foresee consumption in 2019 will move down by around 17 percent, while we expect the revival in consumption to continue in 2020 and exceed the levels recorded in 2018. To change the doubtful approach regarding to impose our own import duties or measures as well as to ensure that the recovery in consumption focuses on domestically produced materials not to imports carries a lot of importance if we do not want to return to those days with current account deficit.
Otherwise, we are concerned that our exports will continue to fall due to protectionist measures while our imports rise. Despite all negative conditions, we expect our steel sector, which shrunk by 10 percent in 2019 following a diverse trend compared to the global steel industry which grew, to record a bigger increase than the global industry in 2020, supported by the rise that will be secured in domestic steel consumption.