Export leader

The GCC is an important market for Turkish steel exports.

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Turkey’s historical trade ties to the Gulf region have allowed it to develop a strong export market for its building materials. Hundreds of Turkish companies have had success in the six-nation hub, fiercely competing with local suppliers on price, quality and variety of products.

This is partly due to their increasing presence in trade shows such as the Dubai-based The Big 5, which last year showcased firms such as Turkish Ceramics and AFS Flexible Duct in the growing Turkish pavilion.

But the materials exports are dominated by its metal production, largely comprised of Turkey’s voluminous steel industry. The country’s manufacture of steel began with its first plant in 1937, and grew domestically since the beginning of the 1980s on the back of large private-sector investment.

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Turkey is today the tenth-largest manufacturer of the metal in the world, and the third-largest producer in Europe, according to research by Deloitte, the financial services firm. It is also the largest manufacturer of the metal in the Middle East, according to the UAE’s Ministry of Foreign Trade.

The country mainly produces long steel products, which make up 82% of its steel product output, manufacturing 21 million tons in 2009. Most of this growth has been fuelled by the high construction activity across the Middle East, particularly in the Gulf.

The success of Turkish steel commercially has bolstered production, and in the first half of this year, Turkey’s crude steel output rose 21.3% to 16.4 million mega-tonnes, according to the Turkish Iron and Steel Producers’ Association.

The biggest regional importers have been identified by Deloitte research as being the UAE – though the country is the second-biggest Middle East exporter - Egypt, Iraq, Libya and Yemen.

Turkey’s aluminium sector has also grown sharply, reaching a production capacity of 65,000 tonnes a year in 2009, mostly exporting extrusions and flat products. Exports rose 42.9% between 2005 and 2009, with Iraq the third biggest recipient globally.

Overall, Business Monitor International expects production levels to increase in the next few years in line with the consumption forecast, with a CAGR (Combined Annual Growth Rate) of 7.5%.

The success of Turkish metal exports for the Gulf’s construction industry has brought with it some discontent that it is undercutting local rivals. Last October, Bhaskar Dutta CEO of Oman’s Al Jazeera Steel Products Company said Turkey and China have been dumping cheap steel in the GCC, and called on its Technical Secretariat for Anti Dumping (TSAD) to intervene.

“Local steel companies have invested a lot of money in the GCC, and there is a lot of dumping [of steel] going on in this region. We need the TSAD to help us put a stop to this,” he told a conference audience in Abu Dhabi, adding that local manufacturers would go out of business as a result, despite the need for greater supply of crude steel products to meet demand.

Data that capture the wholesale prices for steel products only partly vindicates this view. In July last year, Turkey appeared to have the upper hand against rivals Qatar and the UAE, with the average price a tonne of 10-25mm steel bars reduced to $594.3, the same as the UAE, compared to $653.4 in Qatar, with Turkish high-tensile steel a tonne down to $601 compared to $603 and $617, according to Statistics Centre Abu Dhabi (SCAD), a government entity that tracks industrial prices.

This year, prices have risen: Turkey’s 10-25mm steel bars a tonne increased from $741 in January to $769 in June – far higher than the $551 from Qatar, which reduced its prices – with its high-tensile steel range also losing out in price comparison, according to reports from the SCAD.

However, price competitiveness is not the only issue when it comes to the growth of Turkish metal in the GCC, distributors say. High demand from countries such as Saudi Arabia, currently undergoing a renaissance in construction nationwide, means the GCC still falls short of meeting the demand, allowing foreign products to be sold locally.

“If you look at market demand, we cannot supply the total amount needed,” says Mohammed Al Arafi, assistant vice-president of sales at Emirates Steel, the UAE’s biggest integrated manufacturer of rebar and wire rod. “The two million tonnes produced is not sufficient, and so the rest comes from countries such as Turkey.”

Turkey remains a competitor in the region, he said, adding that Emirates Steel still has around 54% of the market, and is lining up a new heavy section of production for structural steel next year. Some Turkish suppliers have scaled back their distribution in the GCC, showing that their products may not be flooding the market as is feared.

Emre Kuzu, area marketing manager at Metal Market International Company, a Turkish global supplier, said the company is seeing greater margins in Africa since the financial crisis. “We are not distributing as much to the GCC, because for the moment the price competitiveness against 2008 and 2009 is not so high.”