Kardemir hopes rise again for survival
Kardemir is the first heavy industry mill of Turkey, initiated by the instructions of Ataturk under the name of Karabuk Demir Celik Fabrikalari. The mill started its operations in 1939 and became a state economic enterprise in 1955. It played an important role in the modern construction of the country until the 1960s. Thereafter Isdemir and Erdemir, the other two integrated steel mills of Turkey were established to accompany Kardemir. Throughout years Kardemir's facilities started to become out of date. The establisment of electric arc furnaced mini mills started to snatch some of Kardemir's market share. Consequently in the 1980s Kardemir made modernisations on its various components however in 1990s continous loss reports started to come up and led to a government decision to privatize the plant. The privatisation was actualized in 1994 in the following years of which the company was able to see certain profit in its accounts. With the privatisation Kardemir shares were sold to:Group A Kardemir employees 51.8% Group B Manufacturers and merchants 24.2% Group C Craftsmen and artisans 1.3% Group D Local inhabitants 22.7%Kardemir was unlucky with the timing of new investments as it was hit by the economic crisis triggered in 1997 first in Asia and extended over to Russia showing impacts worldwide, bringing the steel prices down by a serious amount like $100/mt. This crisis caught Kardemir before completion of the post-privatisation modernisation process. Furthermore, in direct connection to Kardemir's location, procurement of the raw materials for production has always been a burden of extra cost. The stockpiling of the materials at the port and railage of same to the plant caused around $12-15/mt extra and considering the same procedure applied when it came to taking back the produced material down to ports for sales shipments, it was extremely difficult for Kardemir to compete with the other integrated mills located at the ports. The local market sales alternative turned out to be a failure with the negative impacts of the earthquake in Turkey, another handicap for Kardemir's survival, as for this reason the construction sector almost stopped. Another disadvantage of Kardemir, and consequently Turkish market is that the widely consumed steel worldwide is rather flat whereas as a result of disorganized investments in the country, the focus is on longs production. On the other hand, a government decree dated July 8, 2002 came in as good news for assisting Kardemir's recovery. The decree is aiming to restructure Kardemir's outstandings to the state economic enterprises as of June 30, 2002 by means of extending the repayment periods to a maximum of 10 years with a 3-year grace period, under the coordination of the Undersecreteriat of Treasury and the Privatization Administration. If a feasibility study is approved, a credit of upto $20million will be granted by the Turkish Development Bank Corp. Furthermore, debts to local and foreign banks and companies will be restructured within the working plan of the new management, which is considered to be a professional independent team. The company will be allowed to receive raw material and energy from the state owned suppliers, effecting 50% of payment on due dates and the balance within a year. However if this working plan is not strictly performed and fulfilled, then the liquidation of the company will have to be reconsidered. Kardemir's total outstandings today amount to $170million and in order to avoid such situation, expertise in financing and banking as well as trading and developing opportunities of production and sales must be looked for in the new management. A board meeting is expected to be held on August 14, 2002 in order to determine this new management.