International credit rating agency Standard & Poor's has affirmed its 'B+' long-term corporate credit rating for
Turkey's largest integrated steelmaker
Erdemir, with a stable outlook. The affirmation follows
Erdemir's strong performance in 2013, supported by
Turkey's favorable local flat steel market conditions and
Erdemir's strong competitive position as the only integrated flat steel producer in
Turkey.
S&P revised its assessment of
Erdemir's business risk profile upward to "fair" from "weak", reflecting the company's position as the only integrated flat steel producer in
Turkey, with capacity utilization exceeding 90 percent, and above average profitability.
Erdemir's production covers approximately 40 percent of domestic consumption of flat steel, which is growing, while the remainder is largely imported. This is because competitors' recently built electric arc furnaces (EAF) have not been competitive, owing to high scrap prices compared with the prices of iron ore and coal that
Erdemir uses in its blast furnaces.
At the same time, S&P said that it expects
Erdemir's profits to remain volatile and sensitive to local steel market developments in
Turkey and, longer term, to the spread between scrap versus iron ore and coal prices. The rating agency pointed out that
Erdemir's lack of integration into raw materials is a weakness compared, for instance, with Russian steel producers.
According to S&P forecasts, GDP growth rate in
Turkey will be 2.4 percent in 2014 and 2.7 percent in 2015. Low-single-digit growth is expected in demand in the domestic flat steel market.