Erdemir CEO explained raw material strategies
Erdemir's CEO and Board member Kerim Dervisoglu addressed the IISI members on the second day of the 38th Annual meeting in Istanbul. Mr Dervisoglu started his address by giving some brief information about the Turkish steel industry, and underlined that Turkey has still a long way to go for industrialization, as per capita steel consumption is still around only 189 kgs in Turkey which is far below the average per capita consumption; i.e. 350-400 kgs, of industrialized countries. He continued his speech during the raw materials session of the meetings, mentioning that Erdemir is aiming to produce 2.9 million tons of hot metal from 2004 onwards, increasing the iron ore requirements of the plant to 4.7 million tons. As Erdemir has taken over Isdemir works, the group's total raw material requirement is understood to be almost 8 million tons in 2004, which will rise up to 8.7 million tons by 2006. Mr. Dervisoglu stated that domestic iron ore production is very low in Turkey compared to world production and far from being able to meet the demand of local mills for a long time. He said that the Turkish steel industry is facing an iron ore shortage of approximately 6 million tons per year when the requirement of the third integrated steel works of Turkey, namely Kardemir, is also taken into consideration. In addition to the shortage problem, the quality of domestic iron ore emerges as another critical issue for Erdemir. Mr Dervisoglu explained that they have to use best quality and low cost iron ore in order to reach their goal of producing at maximum capacity. Erdemir is also obliged to use more of imported, high Fe content iron ore rather than low Fe content domestic iron ore, due to the modernization projects undertaken at the steel works. Erdemir imports iron ore from several countries but mainly from Brazil, Australia, India, South Africa, Russia, Sweden and Canada. The coking coal supply shortage in Turkey, reaching up to 3.8 million tons per year, was another important issue emphasized during the speech. Continuing his address, Mr Dervisoglu stated that Erdemir has decided to use domestic resources of raw materials more efficiently and acquired Divrigi Pelletizing Facilities and 14 iron ore beds in Turkey. Divrigi plant was quickly modernized and pellet production increased to 100'000 mt from the level of 60'000 mt, and extraction was doubled. Mr Dervisoglu also explained that, as per Erdemir's raw material strategies, feasibility studies are going on for DRI production from local low grade iron ore. DRI could then be used for Sivas Iron and Steel plant which is idle for the time being. If the results are successful, DRI may also emerge as an alternative to ferrous scrap for the Turkish EAF steel mills, one of the major importers of scrap in the world. Another project carried out by Erdemir is the "Train Ferry Project" which will connect Erdemir to the national railway network, reducing raw materials transportation costs significantly. Kardemir is also expected to benefit. On the other hand Erdemir Group is very much interested in Zonguldak and Armutcuk coal facilities too, due to their coking coal and PCI requirements. Mr Dervisoglu said that Erdemir is searching for ownership or partnership possibilities with international iron ore suppliers and miners likewise many other steel makers in the world, in order to be able to secure their iron requirements for long term. He also suggested that low capacity steel producers of the world must come together and form an alliance and then cooperate with iron ore suppliers to avoid crisis.