Possible merger of Turkish mills Kardemir and Erdemir

Possible merger of Turkish mills Kardemir and Erdemir

The new government in Turkey has sped up its studies to save financially troubled integrated Turkish iron and steel mill Kardemir. To make the mill a profitable operation again, one idea is to merge it with the integrated flats producer Erdemir. Today, total outstandings of Kardemir amount to a $200 million. $48 million of this amount is the debt to foreign banks. Kardemir was privatised in 1994 however due to its outstanding debts, it still remains on the edge to go bankrupt. The company needs to take immediate steps for debt restructuring and thereafter increase efficiency in production to overcome these financial problems. Back in July, the previous cabinet outlined a debt restructuring plan for Kardemir, however any improvement has not yet been initialized in this respect. The new government now looks for possibilities of a merger of Kardemir with Erdemir. Erdemir is the sole integrated flats producer in Turkey, with an annual capacity of 3.3 million tons. The mill at the moment can only meet the 60% of the total domestic demand at around 5.5 million tons. After having taken over the Turkish integrated iron and steel plant Isdemir, Erdemir is planning to increase its total capacity to 5 million tons. However this requires first to convert the longs producer Isdemir into flats production. Most industry specialists believe that such a merger might be a burden on Erdemir, as the flats producer is currently focused on the new investments to be immediately put into effect for the conversion of Isdemir, from longs into flat production. The acquisition of Isdemir by Erdemir took place in February 2002. A total investment of around $650 million for this conversion process needs to be effected within 18 months from the date of the takeover. Erdemir has so far invested $50 million into Isdemir for modernisation. In case of a takeover, similar to Isdemir's case, Kardemir will most probably be required to convert into flats production from its current longs production. It is believed that Erdemir, currently focused on improving studies of Isdemir, might not be in a position to efficiently handle such operations for Kardemir at this stage.