REPUBLIC OF TURKEY PRIME MINISTRY

Investment Support and Promotion Agency of Turkey

TURKISH METAL INDUSTRY REPORT

JULY 2010 DECEMBER 2009

CONTENTS
1. 2. 2.1 2.2 2.2.1 2.2.2 2.3 2.4 2.5 2.6 2.7 Executive Summary Sector Overview Global Sector Domestic Sector Overview Key Players Positioning Map Sector Outlook SWOT Analysis Investment Opportunities Sector Establishments and Institutions 3 4 4 7 7 17 18 19 20 21 22 23 24

LIST OF FIGURES ABBREVIATIONS

1.

Executive Summary

This report covers ferrous and non-ferrous metals, both of which are key economic industries for Turkey and the world. Ferrous metals primarily consist of steel, where the industry globally now has an annual capacity of around 1.9 billion tons. Annual steel sector revenue in 2009, badly hit in almost every country in the early months of the year by the economic crisis, was over USD 600 billion. The main non-ferrous metals are copper, aluminium, nickel and zinc; total value of non-ferrous metals production in 2009 was USD 172.5 billion. The steel industry is now dominated by China, with about 45 percent of global production. Turkey has also th rd 1 shown impressive growth and is now the 10 largest producer in the world, the 3 largest in Europe. Turkeys crude steel production was 25.1 million tons in 2009. Turkish steel production reached approximately 2.5 1 million tons for the month of May in 2010, increasing by 19 percent from its level of 2 million tons in May 2009. Turkey is predominantly a producer of long steel products which reached a production level of 21 million tons in 2009, constituting 82 percent of Turkish steel production. There has been a strong demand for long steel products in Turkey due to the high level of construction activity, which has left a shortfall in flat production 1 facilities. Western countries generally have an output ratio between long and flat products of 40 percent to 60 2 percent. As of May 2010, 68 percent of steel production was produced in electric arc furnace mills and 32 percent in integrated facilities. Production in integrated facilities have increased by 17 percent in May 2010 when 1 compared to May 2009 and electric arc furnace production has increased by 11 percent. The main raw material in integrated facilities is iron ore whereas the main raw material in electric arc furnaces is scrap, often imported. There are 3 integrated facilities: Erdemir, sdemir and Kardemir. 21 electric arc furnaces and 2 1 induction furnaces form the total of 26 production facilities. Turkish steel exports have reached 16 million tons in 2009 and imports have reached approximately 10 million 3 tons. Long products formed 74 percent of total exports whereas flat products were 56 percent of total imports 4 in 2009. The top 5 long product export markets were Egypt, UAE, Iraq, Libya and Yemen. Flat products are mainly imported from Russia, Ukraine, Romania, Italy and Belgium. The Turkish copper industry constitutes a significant part of Turkeys total metal production. Turkeys copper production reached 6 million tons in 2008. Although the production of copper has been increasing each year 4 since 2004, Turkish copper import levels remained very high, amounting to USD 2 billion. Imports are mainly from Kazakhstan, Russia and Bulgaria. Turkish aluminium consumption increased to 989 thousand tons in 2009 with a CAGR of 5 percent between 4 2005 and 2009. Turkey is dependent on imports due to the lack of domestic aluminium supply. 81 percent of the total imports were primary aluminium whereas the main items exported were aluminium extrusions and flat 5 products, bars, rods and profiles, together comprising 55 percent of the total exports in 2009. Aluminium is mainly imported from Russia, Norway and Germany whereas aluminium products are mainly exported to Germany, Iraq and the UK.

1 2 3 4 5

Turkish Iron and Steel Association (DCUD) Export Promotion Center, Iron & Steel Report, 2010 Erdemir Report, February 2010 Aluminium Manufacturers Union of Turkey (TALSAD) Trade Map 3

2.

Sector Overview

2.1 Global Sector

The metal industry can be divided into two categories, ferrous metals and non-ferrous metals. Ferrous metals primarily consist of iron and varieties of steel. The worlds steel industry has shown strong performance in the recent past in terms of production, capacity utilization and consumption. After the strong boom of the recent years, the global steel sector was affected by the economic crisis in late 2008 and 2009. There was a sharp fall in production at the end of 2008 amounting to 80-90 million tons 6 annually. In addition, steel prices fell sharply. Recovery began as the year progressed and has continued in 2010. Crude steel production in 2009 was 1,220 million tons with a 8 percent decrease compared to the prior 7 year. Non-ferrous metals include mainly copper, aluminium, zinc, nickel, lead and tin, which are used to make alloys, castings, forgings, extrusions, wires, cables, pipes, etc., and used in a number of sectors such as agriculture, infrastructure facilities such as power plants, automobiles, railways, telecommunications, building, construction and in engineering and chemical plants. Major emerging nations such as Turkey that have comparatively low labour rates and a growing domestic demand, have the potential to become key players in the global metal markets.
Figure 1 Global Non-Ferrous Metals Market, 2009 Global Non-Ferrous Metals Market by Category 2009 4.4% 2.2% 11.5% Copper Aluminum Nickel 12.1% 47.2% Zinc Lead Tin 22.6%
Source: Datamonitor

Global Non-Ferrous Metals Market by Region 2009 12.0% Americas AsiaPacific Europe Rest of the world 30.7%
Source: Datamonitor

15.4%

41.9%

Non-ferrous production volumes increased with a CAGR of 1.3 percent between 2005-2009, amounting to 56.8 8 million tons and are expected to reach 67.7 million tons in 2014. Because of the rising prices, global revenues have been rising faster. The global non-ferrous metals market generated revenues that reached USD172.5 8 billion in 2009, representing a CAGR of 5.1 percent for the period 2005-2009. This performance is expected to continue, with an anticipated CAGR of 15.7 percent for the five-year period 2009-2014, which will drive the market to a value of USD 357.5 billion by the end of 2014.

6 7 8

Erdemir Annual Report, World Steel Association Datamonitor, Global Base Metals Report, March 2010 4

Figure 2 Global Non-Ferrous Metals Market Forecast

Global Non-Ferrous Metals Market Forecast

400 350 300 USD billion 250 200 150 100 50 2009 2010 2011 Total
Source: Datamonitor

0.3 27.8%

CAGR: 15.7%

0.25 0.2

14.7% 10.1%

13.3%

13.3%

0.15 0.1 0.05 0

2012 Growth

2013

2014

Main players in the global metal sector are indicated below.

Figure 3 Global Metal Sector Key Players, 2009

Global Metal Sector Key Players, 2009

Company
ArcelorMittal ThyssenKrupp AG Mitsubishi Corporation Nippon Steel Corporation JFE Holdings, Inc.
Source: Datamonitor

Origin
Luxembourg Germany Japan Japan Japan

Sales (USD million)

65,110 54,836 48,864 37,526 30,604

Assets
127,697 60,466 116,559 53,536 41,934

# of Employees
282,000 172,576 59,198 51,544 54,229

Steel
Thanks in part to the strong growth in China, global steel production in 2010 has been running at levels similar to or exceeding 2008, which was a record year.
Figure 4 World Crude Steel Production

World Crude Steel Production

130,000 120,000 110,000 000 ton 100,000 90,000 80,000 70,000 Jan Feb Mar 2007
Source: World Steel Association

Apr

May 2008

Jun

Jul 2009

Aug

Sep 2010

Oc

Nov

Dec

According to the World Steel Association, world crude steel capacity is expected to reach 1.9 billion tons in 9 2010. China is now the main player in the global steel industry with its share of approximately 45 percent in 2009. th 10 Turkey ranked 10 with its 2 percent share in global crude steel production in May 2010.

Figure 5 Top 15 Crude Steel Production by Countries & Top 10 Steel Producers Top 15 Crude Steel Production by Country, May 2010 60 Million ton
50 40 30 20 10 -

Top 10 Global Steel Producers Production (million metric ton) - 2009

90 80 70 60 50 40 30 20 10 -

78

31

31

27

26

21

21

20

17

15

2010 2009 Source: Turkish Iron & Steel Association

Source: World Steel Association

Aluminium
Global aluminium production reached 23 million tons in 2009 where North America is observed to be the main producer of primary aluminium worldwide with 20 percent of the total production in 2009.
Figure 6 World Primary Aluminium Production & Producers Primary Aluminium Production Thousands of metric tons
7,000 6,000 5,000 4,000 3,000 2,000 1,000 1,715 1,681 4,759 2,660 2,508 5,783 4,618 4,658 3,923 4,400

Global Aluminum Producers, 2007 Revenue (USD billion)

Alcoa, Inc.

4.8 4.8
4,117 3,722 2,297 2,211 2008 2009

3.4 2.9 30.7

Rio Tinto Alcan, Inc. Norsk Hydro ASA Aluminum Corp. of China Mitsubishi Aluminum Co. Ltd. RUSAL United Co. Hindalco Industries

6.7 9.7

10 20.1
Source: International Aluminium Institude * Turkey is shown under Asia.

Viohalco S.A. Aluminum Pechiney

Sumitomo Light Metal 16.5 Industries Source: IBIS World & Datamonitor & Freedonia

The aluminium industry is much more consolidated than the steel industry. In 2007, the top 3 aluminium companies hold 40.5 percent of the world primary output while the top 5 steel companies account for 22 11 percent of the total steel produced.

World Steel Association Turkish Iron and Steel Association Deloitte, Process Industries: Metals, Industry Briefing and On-Boarding Report, 2009 6

10 11

Copper
World copper usage has reached 18,075 thousand tons in 2008 with China and the US being the leaders in 12 copper usage. Copper production was similar, at 18,233 thousand tons in 2008. With regards to copper mining, Chile is the leading country having 5,328 thousand tons of copper mine production followed by the US 12 with 1,335 thousand tons; the global total was 15,344 thousand tons in 2008.
Figure 7 World Refined Copper Production and Usage Refined Copper Production, 2008 (000 ton) China
3,791

Refined Copper Usage, 2008 (000 ton)

China United States Germany Japan Korea, South Turkey Other

Chile Japan
7,135

5,198

7,612 3,058

88 Source: ICSG

862 1,282

1,540

United States Russian Fed. Turkey Other

360

2,020 780 1,398

1,184

Source: ICSG

2.2
2.2.1

Domestic Sector
Overview

The Turkish steel industrys foundations go back to the year 1937, to the establishment of Kardemir, the country's first fully integrated iron and steel plant. Two further integrated plants were commissioned in 1965 and 1970, Erdemir and Isdemir. These were both initially publicly owned. Erdemir was floated on the Istanbul Stock Exchange (ISE) during the foundation of the exchange in the 1980s, and privatizations later occurred. The capacity of these integrated plants was steadily increased and they have been supplemented by increasing numbers of privately-owned electric arc furnaces. Turkey has become an increasingly important supplier to the EU.

Steel
Between 2000 and 2008, Turkey performed impressively with a 87 percent increase in production, reaching th 26.7 million tons in 2008. Turkey has moved up to 10 place in the worlds largest steel producing countries as 13 of May 2010. Turkeys crude steel production reached approximately 2,526 thousand tons in May 2010, increasing by 19 14 percent from 2,126 thousand tons in May 2009.

12 13 14

International Copper Study Group (ICSG) Turkeys Iron & Steel Producers Association (DCUD) World Steel Association 7

Figure 8 Turkish Crude Steel Production

Turkish Crude Steel Production

2,700 2,500 2,300 000 ton 2,100 1,900 1,700 1,500 Jan Feb Mar 2007 Apr May 2008 Jun Jul 2009 Aug Sep 2010 Oc Nov Dec

Source: World Steel Association

Turkey is predominantly a producer of long steel products which reached 21 million tons in 2009 constituting 82 percent of total steel production in Turkey. There has been a higher demand for long steel products in Turkey due to the extent of construction activities which has left the flat production facilities lagging behind 15 demand. Turkish steel production and consumption are presented in the charts below. Special steel products are included within long and flat steel products in the figures below. Total steel production reached 25.1 million 15 tons in 2009 whereas consumption was 18.0 million tons.
Figure 9 Domestic Steel Production and Consumption Turkish Steel Production (000 ton)
30,000 25,000 19,593 20,000 3,768 15,000 10,000 15,825 5,000 2006 2007 2008 2009 Long Flat Total Source: Turkish Iron & Steel Producer's Association 2005 19,237 21,810 22,141 20,713 15,000 10,000 5,000 10,000 5,000 2006 2007 2008 2009 Long Flat Total Source: Turkish Iron & Steel Producer's Association 2005 10,536 12,110 10,272 9,693 23,359 4,257 4,122 4,543 4,406 20,000 15,000 10,686 9,363 26,067 26,684 30,000 25,119 25,000 20,000

Turkish Steel Consumption (000 ton)

25,000 18,440 11,661 11,182 8,334 15,000 10,000 5,000 23,771 21,222 21,454 18,027 25,000 20,000

9,077

As of May 2010, 68 percent of steel production was produced in electric arc furnace mills and 32 percent in integrated facilities. Production in integrated facilities increased by 17 percent in May 2010 when compared to May 2009 and electric arc furnace production increased by 11 percent. The main raw material in integrated 15 facilities is iron ore whereas the main raw material used in electric arc furnaces is scrap metal. The table below shows the detail of 2009 production for each of the 3 integrated facilities, 21 electric arc 15 furnaces and 2 induction furnaces making up Turkeys total capacity.

15

Turkish Iron & Steel Producers Association (DCUD) 8

Figure 10 Crude Steel Producers

Crude Steel Producers

ton
Integrated Facilities 1 Erdemir 2 sdemir 3 Kardemir Induction Furnaces 1 lhan Metalurji 2 Bilecik Demir elik (*) Electric Arc Furnaces 1 Asil elik 2 ebita 3 emta 4 olakolu 5 Cer elik 6 Diler 7 Ege elik

Crude Steel Producers

Production 2009
3,715,393 2,749,626 1,097,356 93,075 na 45,117 111,050 93,922 2,143,794 285,419 1,304,530 473,212

Capacity 2009
3,500,000 3,500,000 1,500,000 200,000 na 485,000 750,000 172,000 3,171,300 850,000 1,500,000 2,000,000 8 9 10 11 12 13 14 15 16 17 18 19 20 21

ton
Ekinciler Haba da zmir Demir elik Kaptan Demir elik Kroman Mega Demir (*) MKEK Nursan elik Sider Sivas Demir elik Tosyal Demir elik (*) Yazc Demir elik Yeilyurt

Production Capacity 2009 2009

735,288 2,438,070 3,030,100 1,097,661 921,104 1,044,501 na 2,277 1,012,665 700,920 409,857 na 1,011,054 547,417 1,000,000 4,800,000 5,267,600 1,320,000 1,350,000 1,250,000 na 60,000 1,200,000 720,000 450,000 na 1,000,000 720,000

Source: Turkish Iron & Steel Producers' Association (*): Total capacity of these three facilities: 1,700,000 ton & production: 240,000 ton n/a: not available

Exports and imports of the Turkish steel industry in recent years are summarised in the charts below. As can be seen, exports are higher than imports. Turkish steel exports have reached 16 million tons in 2009 and 16 imports have reached approximately 10 million tons . Long products form 74 percent of total exports whereas 17 flat products form 56 percent of total imports in 2009. The top 5 long product export markets were Egypt, UAE, Iraq, Libya and Yemen in 2009. Flat products are mainly imported from Russia, Ukraine, Romania, Italy and Belgium.
Figure 11 Domestic Steel Exports by Category and by Country Turkish Steel Export
18,000 16,000 14,000 12,000

16,806 12,669 9,493 1,131 1,902 9,645 6,460 10,890 1,394 1,630 13,794 1,244 1,625 1,368 2,407

15,885 1,648 2,213

18,000 16,000 14,000 12,000 10,000 8,000

Long Product Exports by Country, 2009 Egypt UAE

46.0% 14.0%

20.0%

000 ton

10,000 8,000 6,000 4,000 2,000 -

Iraq Libya
9.0% 5.0%6.0%

12,937

11,806

6,000 4,000 2,000 -

Yemen Other

2005 Long

2006 Billet

2007 2008 Flat

2009 Slab

Total
Source: Export Promotion Center, Iron & Steel Report

Source: Erdemir Report, February 2010

16 17

Erdemir Report, February 2010 Export Promotion Center, Iron & Steel Report, 2010 9

Figure 12 Domestic Steel Imports by Category and by Country Turkish Steel Import
14,000

13,241 11,744 907

Flat Product Imports by Country, 2009 12,924 845 9,891 214

14,000 12,000 10,000 8,000

12,000 10,000

9,344 975

1,317 8,647 7,957 8,006

20.0% 41.0% 15.0%

Russia Ukraine Romania Italy Belgium

000 ton

8,000 6,000

5,532
6,000 4,000

6,653
4,000 2,000 -

818 898 2005 Long

1,527 943 2006 Billet

2,497 1,190 2007 Flat

3,005 1,068 2008

3,377 768 2009 Slab

2,000 -

6.0% 7.0%

11.0%

Other

Total
Source: Export Promotion Center, Iron & Steel Report

Source: Erdemir Report, February 2010

In 2009, together with the global economic crisis, the decreasing demand both globally and domestically has affected exports and imports. Turkish steel exports have declined by 5 percent and imports by 23 percent. However, according to BMI forecasts, steel imports are expected to increase by a CAGR of 14 percent between 2010 and 2014 reaching 17.6 million tons. Steel exports are also expected to increase by a CAGR of 18 16 percent between 2010-2014 reaching 31.8 million tons.

Aluminium
The Turkish aluminium sectors roots go back to 1950s but the industry veritably took off with the establishment of the only primary aluminium producer, Eti Aluminyum A.S., in 1974. It has a production 19 capacity of 65 thousand tons/year. The facility produces aluminium by processing bauxite reserves in the region. The majority of the demand for aluminium products comes from the construction, packaging and transportation sectors. Construction accounts for 54 percent of the demand for extruded products, packaging forms 52 20 percent of demand for flat products and transportation forms 75 percent of demand for castings. Asas Aluminyum and Saray Dokum are the main extruded product producers which are listed in the 2009 top 500 companies list of Istanbul Chamber of Industry. Assan Aluminyum and Teknik Aluminyum are the main flat aluminium producers. Assan Aluminyums production capacity is 125 thousand tons for aluminium rolled plates 21 and 50 thousand tons for aluminium foils. Teknik Aluminyums production capacity is 125 thousand tons per 22 year. Turkey produced a total of approximately 676 thousand tons of aluminium products in 2009; extrusion, flat 23 products and secondary aluminium constituting the major part.

18 19 20 21 22 23

BMI, Turkey Metals Report, December 2009 Eti Aluminyum website, http://www.etialuminyum.com/ Central Anatolian Exporter Unions, Aluminium Report, May 2008 Assan Aluminyum website, http://www.assan.com.tr/ Teknik Aluminyum website, http://www.teknikaluminyum.com.tr/ Aluminium Manufacturers Union of Turkey (TALSAD) 10

Figure 13 Aluminium Production Aluminium Production in Turkey

300

Aluminium Production by Category 656 699 676

800 700 600 500 400 300 200 Primary Aluminium Production Secondary Aluminium Extrusion Flat products (plate-roll)

250

562

595

8.1% 5.2% 7.4% 7.5% 17.8%

thousand tons

200 150 100 50 -

20.0% 34.0%

Other Folio Conductor

100 -

2005

2006

2007

2008

2009

Primary Aluminium Production Extrusion Folio Other Source: Aluminium Manufacturers' Union of Turkey

Secondary Aluminium Flat products (plate-roll) Conductor Total Production

Source: Aluminium Manufacturers' Union of Turkey

Total aluminium consumption increased to 989 thousand tons in 2009 with a CAGR of 5.2 percent between 2005 and 2009, 570 thousand tons being primary aluminium. On the other hand, primary aluminium production 24 decreased to a level as low as 35 thousand tons in 2009.
Figure 14- Turkey Aluminium Consumption

Aluminium Consumption in Turkey

700 600 thousand tons 500 400 600 300 200 100 2005 2006 2007 Primary Aluminium Consumption Extrusion Total Consumption 2008 2009 Secondary Aluminium Flat products (plate-roll) 400 200 809 886 1,011 1,070 989 1,000 800 1,200

Source: Aluminium Manufacturers' Union of Turkey

Turkey is largely import dependent due to the lack of domestic supply. Both imports and exports have increased until 2009, when the sector was hit by the global economic crisis. 81.4 percent of the total imports 24 were primary aluminium whereas the main items exported included extrusions and flat products.

24

Aluminium Manufacturers Union of Turkey (TALSAD) 11

Figure 15 Aluminium Imports of Turkey by Product Type

Aluminium Imports
000 ton
Primary Aluminium Secondary Aluminium Extrusion Flat products (plate-roll) Folio Conductor Other Total

2005
393.5 17.0 4.5 57.6 21.8 8.8 13.1 516.2

2006
459.7 12.1 6.2 68.3 23.8 6.7 13.9 590.7

2007
572.1 21.2 8.3 81.3 27.0 9.3 16.5 735.8

2008
598.4 16.9 8.3 82.4 25.2 17.5 20.2 768.8

2009
567.8 14.2 5.3 60.8 19.3 15.5 14.8 697.7

Source: Aluminium Manufacturers' Union of Turkey

Figure 16 Aluminium Exports of Turkey By Product Type

Aluminium Exports
000 ton
Primary Aluminium Secondary Aluminium Extrusion Flat products (plate-roll) Folio Conductor Other Total

2005
27.2 12.6 88.0 66.1 21.7 11.8 42.0 269.2

2006
28.9 14.3 108.6 71.4 24.3 4.3 48.0 299.8

2007
60.6 12.5 124.7 88.6 25.2 10.2 58.9 380.6

2008
60.9 16.2 129.9 89.2 29.5 9.3 63.4 398.3

2009
33.2 11.7 121.2 90.7 37.2 20.2 70.6 384.8

Source: Aluminium Manufacturers' Union of Turkey

Figure 17 Aluminium Exports & Imports by Country Turkish Aluminium Exports, 2009 Turkish Aluminium Imports, 2009

17.3% Germany 8.8% 60.9% 5.0% 4.3% 3.7% Iraq UK Bulgaria France Other 5% 6% 7% 47% 9% 27% Russia Norway Germany Tajikistan Ukraine Other

Source: Trade Map

Source: Trade Map

The top 5 trading counterparties for aluminium exports and imports in 2009 are presented in the charts above. Aluminium is mainly imported from Russia, Norway and Germany whereas products are mainly exported to Germany, Iraq and the UK.

Copper
The Turkish copper industry constitutes a significant part of Turkeys total metal production. Turkeys copper production was 6 million tons in 2008. Although the production of copper has been increasing each year since 2004, Turkish copper import levels remained high due to the lack of sufficient reserves. Copper is imported mainly from Kazakhstan, Russia and Bulgaria. This data indicates that Turkey is still dependent on foreign countries in addressing its copper demand. In relation to high imports, Turkeys copper exports are also low when compared to the countrys exports in the steel industry. 12

Figure 18 Turkish Copper Production

Turkish Copper Production

7,000 6,000 83% 5,000 000 ton 4,000 2,920 3,000 2,000 1,000 2003 (45)% 2004 1,616 12% 2,953 4,294 45% 28% 0.2 0 -0.2 -0.4 -0.6 2005 2006 2007 Growth rate 2008 Copper production
Source: General Directorate of Mining Affairs

6,166 4,806

1 0.8 0.6 0.4

The organizations that have taken a role in the extraction and processing of copper are both government institutes and private sector organizations. These corporations include Eti Bakir A.S, Karadeniz Bakir Isletmeleri A.S. and Cayeli Bakir Isletmeleri A.S.. Copper is largely used in the construction industry, electronics industry, household goods manufacturing industry and also in the biomedical sector, among others. The most common form of products manufactured from the metal are wire rods, cathodes, copper wires, bars and profiles. Karadeniz Bakir sletmeleri and Eti Bakir are the only producers of blister copper (containing 98.5-99 percent copper) in Turkey, but due to the global economic crisis in late 2008, which caused a serious decline in demand and copper prices, blister production stopped in 2009. Cathode production also declined considerably 25 due to the crisis.
Figure 19 Turkish Copper Production

Turkish Copper Production

000 ton
Blister Cathode
Source: Eti Bakr

2007 2008 2009

36 99 40 88 33

Figure 20 Cathode Imports of Turkey

Cathode Imports
000 ton
Cathode
Source: Eti Bakr

2007 2008 2009

268 272 291

Kazakhstan is the major copper supplier of Turkey with a 24 percent share in total imports in 2009, followed by Russia, Bulgaria and Uzbekistan. The main destinations for Turkish copper exports are; Italy, Bulgaria, the US, 26 China and Israel.

25 26

Eti Bakir Trade Map 13

Figure 21 Turkish Copper Industry Export & Import

Turkish Copper Imports & Exports

3,500 3,000 2,500 USD m 2,468 2,000 1,985 1,500 1,458 1,000 500 510 2005
Source: Trade Map

3,152

3,276

1,157 814 880 597 2006 2007 Import Export 2008 2009

Figure 22 Copper Exports & Imports by Country Turkish Copper Exports, 2009 Turkish Copper Imports, 2009

16% Italy 9% 52% 8% 8% 7% Bulgaria US China Israel Other

27%

24% Kazakhstan Russia Bulgaria

8% 12% 12%

17%

Uzbekistan Chile Other

Source: Trade Map

Source: Trade Map

Metal Forging & Casting

The forging and casting industry is highly correlated with the automotive industrys demands. Additional demand comes from the construction, petro-chemicals, machinery and white goods industries. The Turkish 27 metal casting industry included 952 facilities and 25,000 employees as of 2009. Forging is a manufacturing process where metal is pressed, pounded or squeezed under great pressure. Forging requires higher technical knowledge and has a bigger added value compared to casting. Some of the main players in the Turkish forging industry are as follows;

27

Turkish Foundrymens Association 14

Figure 23 Main Players in Turkish Forging Industry

Main Players in Turkish Forging Industry

Company
Parsan Kanca El Aletleri imsata Omta
Source: Deloitte

Capacity (tons/year)
24,000 20,000 20,000 15,000

The casting industry deals with pouring the metal into casts to give them a definite and permanent shape. The global casting industry reached 100 million tons of production in 2007 but then declined to 93 million tons in 28 2008, due to the economic crisis and the shrinkage in construction and automotive industries. Turkey ranks 14 in the world and 5 in Europe in regards of casting production, and has 1.4 percent market share in total global production. Turkey reached 1.3 million tons of production in 2007, but then declined to 1 28 million tons in 2009.
Figure 24 Metal Casting Production Europe Top 5
th th

Casting Production - Europe Top 5

6 5 million tons 4 3 2 1 0 2006
Source: The European Foundary Association

5.84 5.48

5.78

2.65

2.75 2.41 1.33 1.21

2.47 1.43 1.32

2.65

2.39 1.40 1.27

Germany

Italy

2007 France Spain

2008 Turkey

The Turkish casting industry was also hit by the global economic crisis in 2009 and production ceased in nearly 150 casting factories and workshops which left 952 facilities operating in the casting industry at the end of 2009. Total production decreased from 1.2 million tons to 1 million tons. Iron is the main metal produced by 28 metal casting and constituted 79 percent of total production in 2009.
Figure 25 Turkish Metal Casting Production

Turkish Casting Industry

000 ton
Iron Steel Casting Non-Iron Total Production # of employees ('000) # of facilities
Source: Turkish Foundrymen's Associaion

2006
961 132 117 1,210 34 1,306

2007
1,024 144 149 1,317 35 1,226

2008
970 140 155 1,265 29 1,150

2009
810 98 122 1,030 25 952

28

Turkish Foundrymens Association 15

The most important players in the casting industry are as follows:

Figure 26 Main Players in Turkish Casting Industry

Main Players in Turkish Casting Industry

Company
CMS Jant Componenta Dokumculuk Ticaret ve Sanayi A.S. Samsun Makine DEMISAS Dokum Emaye Mamulleri San. A.S. Hayes Lemmerz nci Cevher Dokum San. A.S.
Source: ISO 500 list

2009 Production Based Sales (TRY million)

242 229 138 113 112 108

Exports in the Turkish metal casting and forging industry reached USD 4.7 billion in 2008, showing an increase of 11 percent compared to 2007. Automotive industry products have the biggest share in exported goods constituting 63 percent of the total exports in 2008, followed by the machinery industry constituting 24 29 percent. The main importer of Turkish metal castings and forgings is Germany, constituting 31 percent of the total, 28 followed by Italy and France.
Figure 27 Turkish Metal Casting and Forging Industry Exports

Turkish Metal Casting and Forging Industry - Exports

5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 4,713 4,238 3,072 2,049 969 620 403 490 1,142 609 2,779 2,962

Exports by Country, 2008

Germany 31% 40% France UK 9% 3% 3% 6% 7% Russia Poland Other
Source: Export Promotion Center

Italy

million USD

2006 Automotive

2007 Machinery

Other

2008 Total

Source: Undersecretariat of the Prime Ministry for Foreign Trade Export Promotion Center

Imports in the industry are close to the exports, amounting to USD 4.6 billion in 2008. Again the automotive industry is the main industry forming 68 percent of total imports in 2008.

29

Export Promotion Center 16

Figure 28 Turkish Metal Casting and Forging Industry Imports

Turkish Metal Casting and Forging Industry - Imports

5,000 4,500 4,410 3,680 2,623 3,031 3,143 4,634 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 2006 Automotive 2007 Machinery Other 2008 Total 787 270 1,008 371 1,084 407

2.2.2

Key Players

Top 20 firms operating in the metal industry which were included in the Istanbul Chamber of Industry (ISO) 500 list in 2009 are presented below.
Figure 29 Main Players In Turkish Metal Industry

Main Players In Turkey's Metal Industry

ISO 500 Ranking Company 2009
7 10 11 12 20 23 28 29 35 38 41 46 50 59 63 70 75 77 128 133 Ereli Demir elik Habas Sinai ve Tibbi Gazlar Istihsal Endustrisi A.S. da elik Enerji Tersane ve Ulam San. A.S. skenderun Demir ve elik A.S. olakolu Metalurji A.S. Kroman elik Sanayii A.S. Borelik elik Sanayii Ticaret A.S. Sarkuysan Elektrolitik Bakr San. ve Tic. A.S. Diler Demir elik Endstri ve Tic. A.S. Er-Bakr Elektrolitik Bakr Mamlleri A.S. Kaptan Demir elik Endstrisi ve Ticaret A.S. Kardemir Karabk Demir elik Izmir Demir elik Yazc Demir elik Sanayi ve Turizm Ticaret A.S. Assan Aluminyum Sanayi ve Tic. A.S. Nursan elik Sanayi ve Haddecilik A.S. Nursan Metalrji Endstrisi A.S. Ekinciler Demir ve elik San. A.S. Ege elik Endstrisi San. Ve Tic. A.S Yeilyurt Demir elik End. Ve Liman l.

million USD

Subsector
Iron&Steel Crude Steel Iron&Steel Iron&Steel Steel Steel Steel Copper Iron&Steel Copper Iron&Steel Steel Iron&Steel Iron&Steel Aluminium Steel Steel Steel Steel Iron&Steel

Production # of Year Based Sales, Employees Established TRY mn (2009)

3,576 2,520 2,450 2,362 1,547 1,352 1,138 1,029 903 870 824 774 721 678 627 611 578 559 377 366 13,033 1,425 3,200 na 985 937 850 na 500 475 750 3,118 1,051 1,500 900 392 635 1,100 843 320 1960 1964 1880 1975 1945 1985 1990 1972 1978 1981 1983 1939 1975 1949 1987 1983 2005 1983 2001 2001

Source: ISO 500 list, Capital IQ, DD

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2.3

Positioning Map
Assan Alminyum
Production Capacity 125 ,000 tons/year (plate) 50,000 tons/year (foil)

Kroman
Production Capacity 1,100,000 tons/year

Erdemir
Production capacity 7,000,000 ton/year

Colakoglu Kaptan
Production capacity 1,400 ,000 tons/year Production Capacity 3,000,000 tons/year

Kardemir
Production Capacity 1,500,000 tons/year

Yazc
Production Capacity 859,000 tons/year

Yeilyurt Icdas
Production Capacity 5,267,000 tons/year

Production Capacity 1,300,000 tons/year

Borcelik
Production Capacity 1,400,000 tons/year

Diler
Production Capacity 1,300,000 tons/year

zmir Demir elik

Pr Production Capacity 1,320,000 tons/year

Haba
Production Capacity 3,000,000 tons/year

Ege elik
Production Capacity 2,000 ,000 tons/year

Isdemir Erbakir
Production Capacity 300,000 tons/year
Production Capacity 2,200,000 tons/year

Sarkuysan
Production Capacity 200 ,000 tons/year

Ekinciler
Production Capacity 1,000,000 tons/year

Nursan Metalrji Copper Iron & Steel Aluminium

Production capacity 500,000 tons/year

Nursan elik
Production capacity 500,000 tons/year

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2.4

Sector Outlook

The outlook for the Turkish metals industry is correlated with the countrys economic performance in general, because the metal industry depends on demand from a wide range of key industries. According to the Turkey Forecast Report published by EIU in January 2010, the Turkish economy is expected to grow on average 5 percent per year for the next five years. As the country recovers from the negative effects of the global crisis, it will continue in the upcoming years to rapidly expand its industrialization. An increase in the production of housing, automobiles and other products is expected. Consequently, Turkeys metal industry should benefit from this expansion significantly and demonstrate an increase in demand as well as production. According to a BMI forecast for the Turkish metal industry, steel consumption is expected to increase with a CAGR of c.7 percent for both crude steel and finished steel between 2010 and 2014. Furthermore, production 30 growth is also expected in line with the consumption forecast, with a CAGR of c. 7.5 percent. Parallel to the upward trend in consumption and production, the steel industry is expected to increase its exports and imports as well. Exports and imports are expected to increase with a CAGR of c.23 percent and 20 percent respectively. Turkey is expected to continue exporting more metals and metal products (especially steel) than it will import. The countrys exports are expected to reach approximately 31 million tons of steel by 31 2014.

Figure 30 Turkish Steel Industry, 2010-2014f

Turkey's Steel Industry 2010-2014

2010f
Consumption Apparent crude steel use (000 tons) Apparent finished steel use (000 tons) Production Production ('000 tons) Production (USDmn) Exports Exports ('000 tons) Exports (USDmn) Imports Imports ('000 tons) Imports (USDmn)
Source: BMI

2011f
34,581 27,429 31,640 24,693 21,228 16,998 12,837 11,636

2012f
36,920 29,402 34,116 26,626 24,720 20,737 14,489 13,759

2013f
39,619 31,679 36,635 28,591 28,256 24,422 16,146 15,797

2014f
42,620 34,210 39,130 30,539 31,804 28,296 17,666 17,792

32,330 25,530 29,447 22,575 17,624 13,202 10,453 8,864

The government announced in February 2009 that it was planning a stimulus package to rescue the shi major consumer of steel in Turkey and represents around 15% of GDP. The shipbuilding industry has w new orders in response to the global economic downturn and financial crisis, and some existing orders postponed. The rescue package could include measures to expedite the process of receiving corporate extension of Eximbank loans for the construction of ships for export. The government may also place o financial guarantor for companies in trouble. Significant steel price increases are expected in Q409, when the recovery begins to really pick up. BMI f August and accelerating from September. However, some steel market segments are moving slower th struggled to sell their rebar and wire rod production to the domestic and export markets due to weak d states had halted orders by Q209 due to the economic slowdown, a collapse in the real estate market a taking time to clear. BMI forecasts a fall in exports of nearly 11% in 2009 to 16.3mn tonnes. However, there are a number o figure. Egyptian imports showed a marked slowdown in Q209 from the surge seen in Q109, with report inventories at Egyptian ports in May. If there is no revival in the UAE market, exports could fall at a high 30 BMI the upside, the Emirates have not scaled back government-funded infrastructural projects, providing st 31 Turkish Iron & Steel Producers Association the near term. A major risk factor for the Turkish metals industry is the excessively volatile exchange ra for producers to plan costs. By May 2009, the Turkish lira was trading at an historic low of TRY1.82:US$ 19 costs of imports, particularly imports of aluminium ingots on which Turkey is heavily dependent. By Au recovered to TRY1.51:US$, but is still forecast to fall to TRY1.85:US$ by end-December. While we ackno substantial gains in the currency in the short term, fundamental pressures over the longer run are expe

2.5

SWOT Analysis

trengths

eaknesses

Turkey is now an important steel manufacturing rd nation, ranking 3 in production in Europe after Germany and Italy. Turkey offers high employment opportunities in the sector, currently 114,500 employees, and has a large skilled labour pool.

Imbalance between flat and long products. There is a deficit in flat steel and special steel production capacity in contrast to the excess capacity in long steel production. Imbalanced structure of the production facilities, where electric-arc furnaces (minimills) form 68 percent of the total production capacity, leading to a high requirement for scrap imports.

pportunities

hreats
High energy costs which negatively affect production costs. Volatile and often increasing raw material costs (scrap steel, iron ore and coal). Growth in China tends to pull raw material prices higher. Competition arising from lower-quality, lower priced semi finished goods imported from the CIS.

Increase in demand for housing, automobiles and other products such as white goods leads to growth in the demand for iron and steel production. With the National Restructuring Plan (UYYP), the industry is expected to benefit from Government incentives for investments in flat products and modernization. Furthermore, investments in flat products in the recent years are expected to compensate the supply deficit of flat products.

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2.6

Investment Opportunities

Major M&A transactions in Turkey since 2005 are presented in the list below:
Figure 31 M&A Transactions in Turkey, 2005-09
# Acquirer
1 2 3 4 5 6 7 8 9 10 Zeman International Aldridge Minerals Inc ArcelorMittal SK Networks Ada Metal AMCOL Minerals Europe Ltd ArcelorMittal Magnitogorsk Iron and Steel Works (MMK) Metallink Metal Oyak

Origin
Austria Canada Luxembourg Korea Turkey UK Luxembourg Russia Turkey Turkey

Target
Alfa elik Valhalla Resources Limited ArcelorMittal Istanbul Stainless Service Turkey (formerly Uginox) Daiyang Metal Sanayi Demrad Dkm Bensan Aktiflestirilmis Bentonit Sanayi ve Ticaret A.S. Rozak Demir Profil Ataka Metalurji Ferro Dkm Erdemir

Target subsector
iron & steel mineral oil exploration coil processing iron & steel iron & steel white bentonite production iron & steel iron & steel iron & steel iron & steel

Date
1.7.2009 12.19.2008 7.14.2008 3.31.2008 3.10.2008 6.1.2007 9.10.2007 8.15.2007 6.11.2007 11.2.2005

Stake %
80.0% 100.0% 35.0% 30.0% 100.0% 100.0% 51.0% 50.0% 56.7% 49.3%

Deal Value (USD m)

na 9 na 38 24 12 na 102 82 2,960

Source: Mergermarket & ISI

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2.7

Sector Establishments and Institutions

Figure 32 Metal Sector Establishments and Institutions

Establishment/ Institution

Code

Description
Organised on the basis of materials subject to export, trying to increase exports as it is accepted priority goal for the development of the country. Has 6 Associations in its body: 1) Istanbul Mineral Exporters' Association 2) Istanbul Ferrous and Non-Ferrous Metals Exporters' Association 3) Istanbul Chemicals and Chemical Products Exporters' Association 4) Istanbul Chemicals and Chemical Products Exporters' Association 5) Istanbul Precous Minerals and Jewellery Exporters' Association 6) Istanbul Iron and Steel Exporters' Association

Contact details

General Secreteriat of Istanbul Mineral and Metals Exporters' Association

IMMIB

Dis Ticaret Kompleksi A Blok Cobancesme Mevkii Sanayi Cad. 34197 Yenibosna Bahcelievler Istanbul Turkiye Tel: (0212) 454 00 00 Fax: (0216) 454 00 01 Website: www.immib.org.tr

Turkish Exporters Association

TIM

The objective of the Association is providing cooperative achievements of the whole exporter firms.

Turkish Aluminium Manufacturers Association

TALSAD

Organization has 80 members. Represents its members in domestic or foreign exhibitions, organizes studies, seminars to support the sector growth. Organization has 20 members. Main goals are promoting Turkish Iron and Steel Industry to the level of the ones in the developed countries; developing a structure which can keep up with the global developments of all aspects; compiling and disseminating the statistical information concerning the Iron and Steel Industry in Turkey and the world; discussing the problems that the members face; proposing solutions and applying all lawful means to solve those problems.

Dis Ticaret Kompleksi B Blok Cobancesme Mevkii Sanayi Cad. 34197 Yenibosna Bahcelievler Istanbul Turkiye Tel: (0212) 454 04 71/454 04 90 Fax: (0216) 454 04 13/454 04 83 Website: www.tim.org.tr Assan Alminyum Tesisleri, E5 yolu zeri 32. km, 81700 Tuzla Istanbul Turkiye Tel: (0216) 446 79 61 Fax: (0216) 446 79 62 Website: www.talsad.org.tr Cinnah Cad. Alaam Sok. No:1/24 Cankaya Ankara Turkiye Tel: (0312) 466 37 34 Fax: (0312) 467 22 07 Website: www.dcud.org.tr

Turkish Iron & Steel Producers Association

DCUD

Istanbul Copper and Braze Manufacturers Association

Istanbul Bakir ve Pirinc Sanayicileri Dernegi Sitesi Hurriyet Cad. No:2 34900 Beylikduzu Main goals are to protect common interests of copper and braze producers; Buyukcekmece Istanbul Turkiye consolidate loyalty amongst these industrialists, to make development in Tel: (0212) 875 10 05 (3 lines) the sector; meet the requirements of the members. Website: www.bakirpirincdernegi.org.tr

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LIST OF FIGURES
Figure 1 Global Non-Ferrous Metals Market, 2009 Figure 2 Global Non-Ferrous Metals Market Forecast Figure 3 Global Metal Sector Key Players, 2009 Figure 4 World Crude Steel Production Figure 5 Top 15 Crude Steel Production by Countries & Top 10 Steel Producers Figure 6 World Primary Aluminium Production & Producers Figure 7 World Refined Copper Production and Usage Figure 8 Turkish Crude Steel Production Figure 9 Domestic Steel Production and Consumption Figure 10 Crude Steel Producers Figure 11 Domestic Steel Exports by Category and by Country Figure 12 Domestic Steel Imports by Category and by Country Figure 13 Aluminium Production Figure 14- Turkey Aluminium Consumption Figure 15 Aluminium Imports of Turkey by Product Type Figure 16 Aluminium Exports of Turkey By Product Type Figure 17 Aluminium Exports & Imports by Country Figure 18 Turkish Copper Production Figure 19 Turkish Copper Production Figure 20 Cathode Imports of Turkey Figure 21 Turkish Copper Industry Export & Import Figure 22 Copper Exports & Imports by Country Figure 23 Main Players in Turkish Forging Industry Figure 24 Metal Casting Production Europe Top 5 Figure 25 Turkish Metal Casting Production Figure 26 Main Players in Turkish Casting Industry Figure 27 Turkish Metal Casting and Forging Industry Exports Figure 28 Turkish Metal Casting and Forging Industry Imports Figure 29 Main Players In Turkish Metal Industry Figure 30 Turkish Steel Industry, 2010-2014f Figure 31 M&A Transactions in Turkey, 2005-09 Figure 32 Metal Sector Establishments and Institutions 4 5 5 5 6 6 7 8 8 9 9 10 11 11 12 12 12 13 13 13 14 14 15 15 15 16 16 17 17 19 21 22

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ABBREVIATIONS
BMI CAGR EIU ISPAT TPA DCUD ICSG UK UAE USGS GDP TRY USD Business Monitor International Compound Annual Growth Rate Economist Intelligence Unit Republic of Turkey Prime Ministry Investment Support and Promotion Agency Ton per annum Turkish Iron & Steel Producers Association International Copper Study Group United Kingdom United Arab Emirates United States Geological Survey Gross Domestic Product Turkish Lira US Dollar

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Disclaimer This Document is one of a series which has been assembled by the Republic of Turkey Prime Ministry Investment Support and Promotion Agency (ISPAT) with the assistance of DRT Kurumsal Finans Danmanlk Hizmetleri A.. (Deloitte) for the sole purpose of giving investors a sector synopsis of key priority growth sectors in Turkey. This Document has been prepared for information purposes relating to this sector. This Document does not purport to be all-inclusive nor to contain all the information that a prospective investor may require in deciding whether or not to invest in this sector. No representation or warranty, express or implied, is or will be made in relation to the accuracy or completeness of this Document or any other written or oral information made available to any prospective investor or its advisors in connection with any further investigation of the sector and no responsibility or liability is or will be accepted by ISPAT or Deloitte or by any of their recipient or respective officers, employees or agents in relation to it. Each of ISPAT and Deloitte and their respective subsidiaries and associated companies and their respective officers, employees and agents expressly disclaims any and all liability which may be based on this Document or such information, and any errors therein or omissions therefrom. The information contained herein was prepared based on publicly available information sources at the time that this Document was prepared. In particular, no representation or warranty is given as to the achievement or reasonableness of future projections, targets and estimates, if any. ISPAT and Deloitte have not verified any of the information in this Document. Recipients of this Document are not to construe the contents of this Document as legal, business, tax or other advice. Any recipient or prospective investor should not rely upon this Document in making any decision, investment or otherwise and is recommended to perform their own due diligence and seek their own independent advice. This Document does not constitute an offer or invitation for the sale or purchase of securities or any of the businesses or assets described herein or to invest in the respective sector and does not constitute any form of commitment or recommendation on the part of ISPAT or Deloitte or any of their respective subsidiaries or associated companies. Neither ISPAT nor Deloitte accept any liability in relation to the distribution or possession of this Document in and from any jurisdiction and neither ISPAT nor Deloitte shall be liable for any violation by the recipient of any such registration requirements or other legal restrictions. Under no circumstances should this Document itself or any modified version be published or reproduced or sold by any third party in return for a fee or membership. The intellectual property rights of this Document are owned by ISPAT.

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