Turkey is the eighth largest steel producer in the world. Over the past two years, its steel production and exports have declined due to global and internal challenges. Nevertheless, Turkish companies continue to invest in expanding production capacity, relying on domestic market needs.
For the second consecutive year, the Turkish steel industry has been on a downward trend, with Turkey maintaining its position as the world’s eighth largest steel producer. According to the World Steel Association, Turkish steel producers manufactured 33.7 million tons of steel in 2023 (a 4% decrease from the previous year) and 35.1 million tons in 2022 (a 12.9% decrease from the previous year).
The decline in Turkey’s steel production in 2022-2023 is due to macroeconomic instability, which has led to high uncertainty in the domestic market. In the fight against high inflation, which was at 64.8% annualized in December 2023, the Central Bank of Turkey raised the interest rate seven times consecutively in the last year. It increased to 42.5% per year at the end of the year, from 8.5% in June (the rate was raised to 45% per year in January 2024).
However, tightening monetary policy has not helped prevent the depreciation of the lira, which lost about 60% of its value against the dollar in 2023. On one hand, the depreciation of the national currency limits the influx of imports, which become more expensive. On the other hand, the depreciation of the Turkish lira indicates serious problems in the economy, which also restricts the growth of domestic steel consumption.
The Turkish steel industry relies on electric arc furnaces (in 2022, 71.5% of the country’s steel is produced by these), so rising electricity prices remain a major unfavorable factor for the industry. According to the Steel Exporters’ Union of Turkey (CIB), electricity prices in Turkey surged in 2022 and accounted for 27% of the production costs of steel mills, compared to 8% in 2021. Subsequently, gas and electricity prices for the industry were slightly reduced at the end of 2022 and the beginning of 2023, but it was not possible to completely mitigate this factor on production costs.
Other factors affecting steel production and consumption in Turkey include the increase in VAT on steel products from 18% to 20%. This decision has a negative impact on the domestic market outlook, as it means higher prices for rolled steel products.
The earthquake in February 2023 also had a negative impact on the Turkish steel industry, as one-third of the steel mills were forced to temporarily stop production. Subsequently, it was expected that the mills could at least partially recover losses, as the demand for steel products for construction projects aimed at combating the effects of the earthquake would increase.
Consumption of rolled steel products increased in 2023 (by 17.1% compared to the previous year – up to 38.1 million tons compared to 2022), but this additional demand did not help avoid a 4% decline from the previous year in steel production. Turkish steel producers complain that the increase in demand was covered by imported steel products. According to the Turkish Steel Producers Association (TCUD), steel imports in Turkey increased by 15.5% from the previous year in 2023.
The decline in steel production in Turkey in 2022-2023 also led to a decrease in consumption and imports of scrap iron. According to SteelMint, Turkey’s scrap iron consumption in 2023 decreased by 6% from the previous year – down to 27 million tons compared to 2022. According to the Turkish Statistical Institute (TUIK), the country reduced imports of scrap iron by 10% from the previous year – down to 18.83 million tons in 2023. The top five suppliers include the USA and European countries (Netherlands, Belgium, United Kingdom, Romania).
The European Steel Association is pushing for stricter controls on scrap iron exports. The first measures in this direction have already been taken – from January 2024, a new Waste Transport Regulation will come into force, which establishes technical barriers for scrap iron exports to countries outside the Organisation for Economic Co-operation and Development (OECD). If conditions for scrap iron exports from the EU tighten further, Turkey risks facing a shortage of raw materials for its own steel industry.
For the second consecutive year, Turkey’s steel exports have shown a negative trend. According to the Turkish Steel Association (TCUD), the country’s steel exports decreased by 30.6% from the previous year in 2023 – down to 10.5 million tons. Export revenues dropped by 40.7% from the previous year – down to 8.3 billion dollars. In 2022, steel exports from Turkey decreased by 23.5% from the previous year – down to 15.1 million tons.
Between January and November 202
3, steel imports (including semi-finished products) into the European Union from Turkey decreased by 51% from the previous year (average monthly imports for 11 months in 2023 – 199 thousand tons). In 2022, imports of Turkish rolled steel products into the European market decreased by 6% – down to 4.33 million tons. Its market share in the EU in 2022 was 15%.
Analysts expect the Turkish steel market to improve this year, due to the global increase in steel demand and the decrease in interest rates worldwide. In its October 2023 report, the World Steel Association forecasts that steel consumption in Turkey will increase by 5% – up to 40.6 million tons in 2024.
The TCUD Association forecasts that domestic steel demand will increase in 2024, supporting investments and new capacities that will come into operation in the second half of 2023. Turkish producers, such as Kardemir, Yıldız, Colakoglu Metalurji, Hasçelik, have planned investments of millions of dollars in new production capacities for 2024 and beyond. Turkish companies wish to increase the production of higher value-added products for domestic needs due to difficulties related to exports.