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Overlook of Turkish steel industry and position in the Middle East: comparison of the position of Turkey with that of Iran in the region02.09.2015EMRAH UURSAL Foreign Trade Manager

OK1Turkish Steel Production 2Source: TCUD

50 Million Ton Designed Capacity 11 Million BF Based & 39 Million EAF Based%22 ORE BASED%78 SCRAP BASED CAPACITY Order of Countries for Crude Steel Production (2015-6 months) 3Source: WORLD STEEL

Big decrease in Turkish Steel Production& Increase in IRAN

RANK2015COUNTRY2014-6 months2015-6 months

% change15/14

% share(2015)1.China409.971415.370-1,350,42.Japan52.63555.239-4,76,53.India44.95743.1334,25,54.United States39.85743.611-8,64,95.Russia35.71335.4180,84,46.South Korea34.53436.300-4,94,27.Germany22.14922.485-1,52,78.Brazil 17.07516.7462,02,19.Turkey16.18917.163-5,72,010.Italy11.71913.105-10,61,411.Ukraine11.25815.473-27,21,412.Taiwan, China10.64411.159-4,61,313.Mexico9.2569.652-4,11,114.Iran8.3728.0154,51,015.France8.1668.305-1,71,016.Spain7.8307.5783,31,017.United Kingdom6.2586.1981,00,818.Canada6.2506.2080,70,819.Poland4.9474.20717,60,620.Austria3.9693.9560,30,53Turkey's Crude Steel Production by Processes ( 2008-2015-6 months )

4Source: TCUD

Turkey's EAF capacities getting idle 2015-6 months

5Source: TCUD

Turkey's EAF capacities getting idle 2015-6 months

6Source: TCUD

Turkey's EAF capacities getting idle! 2015-6 months

7Source: STEEL ORBIS

1.257K Less scrap, 605K More Billets imported in first 6 m of 2015Turkish Steel Sectors Production& Consumption Structure 2015 /68Source: TUIK

Turkish Steel Sector is one of the biggest long steel producers in the world out of China. The production methods are not complicated, products are low value added such as reinforcing steel bars which is Turkeys major product. Turkey is the biggest reinforcing bars exporter in the world after China.

8,9 Mt Excess Long Products Production of Longs and Flats 8Source: Turkish Steel Producers As. TURKEYS REBAR EXPORTS UNDER PRESSURE 9-%58 of total Turkish rebars exports head to MENA (2141K in first half).

2014/ 6 m2015-6 m% Change-15/14MTMTQuantity1UAE611.360702.56514,9 2USA319.316642.896101,3 3Iraq512.020384.261-25,0 4srael349.849269.018-23,1 5Egypt167.868263.56157,0 6Yemen380.401210.828-44,6 7Kuveyt45.022132.286193,8 8Brazil128.564105.288-18,1 9Ethiopia154.54597.455-36,9 10Oman39.71192.144132,0 11KSA133.55788.111-34,0 12Syria24.97571.759187,3 13Peru56.86565.20114,7 14Libya172.17548.892-71,6 15Colombia9.69446.151376,1 16Costarica36.72341.39012,7 17North Cyprus26.05431.63355,3 18Cibuti2.59231.1771.102,6 19Chile21.27225.38219,3 20Azerbaijan18.98621.10011,1 Total3.887.1673.643.490-6,3 9Source: Turkish Steel Producers As. TURKEYS BILLET IMPORTS- SOARING UP 10Iran would export higher quantities of billes to Turkey due to cost adventage and excess capacity.

2014-6 m2015-6 m%CHG15/14MTMTQuantity1Ukraine919.110941.5162,4 2Russia491.149863.71675,9 3China96110.667115.412,4 4Belarus17.453105.445504,1 5Georgia43.42947.92910,4 6Albania35.15238.93710,8 7Bosnia21.04631.72450,7 8Serbia36.99817.904-51,6 9Libya012.500100,0 10Iran010.130100,0 11Germany7.4548.87519,1 12Italy10.0353.888-61,3 13 UK6551.17379,1 14Brazil488481-1,4 15Belgium0355100,0 16Croatia0292100,0 17USA357279-21,9 18France5.726237-95,9 19Romania14119236,0 20Spain12019058,3 Total1.592.4092.196.94238,0 10Source: Turkish Steel Producers As. TURKEYS HRC EXPORTS- LOOSING WEIGHT 11US decision to investigate AD for HRC exports from Turkey has already started to affect the demand from the top buyer.

2014-6 m2015-6 m%CHG-15/14MtMtQuantity1USA203.085180.493-11,1 2taly96.00886.211-10,2 3Spain35.97448.63335,2 4Portugal54.01348.564-10,1 5Romania38.23742.47911,1 6Iraq15.06938.557155,9 7UK15.58338.053144,2 8Morocco29.77131.9797,4 9Algeria026.093100,0 10Tunus13.54424.16478,4 11Tailand24.90722.690-8,9 12Syria2.88417.953522,4 13Local Free Zone44.16917.695-59,9 14Libya9.97815.07351,1 15Greece37.22314.197-61,9 16Nigeria11.57411.7991,9 17Ethiopia11.07611.5884,6 18Mexico011.239100,0 19Canada52.21910.730-79,5 20srael8.85610.21015,3 Total832.102802.494-3,6 11MENA STEEL PRODUCTION FIGURES- IRANS LEADERSHIP12Source: WORLDSTEEL

IRAN is the biggest producer in MENA region which is also Turkeys main trade partner. IRAN is the only country in the region increased the production in first 6 months 2015. IRAN has most available sources in the region for steel production. (Natural gas & Iron ore)The potential will be clearly seen after sanctions removed.

MENA Steel2014-6m2015-6m

% CHG(15/14)

Rank(2015)Iran8.0158.3724,514.Saudi Arabia3.1113.1180,224.Egypt3.3623.115-7,325.UAE1.2941.48314,635.Qatar1.4481.301-10,237.Morocco2823016,653.Libya475234-50,855.MENA17.98817.924-0,412NUCLEAR DEAL & WORLDBANKs Positive Forecasts on IRAN13

Lifting sanctions related to Irans nuclear program will have a significant impact on the world oil market, the Iranian economy and Irans trading partners. Irans full return to the global market will eventually add about a million barrels of oil a day, lowering oil prices by US$10 per barrel next year, according to the World Bank, which also expects economic growth in the country to surge to about 5% in 2016 from 3% this year. The Banks report estimates that exports from Iran will eventually increase, too, by about US$17 billion, which is about 3.5% of its GDP. Britain, China, India, Turkey and Saudi Arabia are among the countries most likely to see the largest rise in post-sanctions trade with Iran. The lifting of sanctions represents an economic windfall to the Iranian economy. Irans experience with managing previous oil windfalls is sobering. The real exchange rate appreciated undermining non-oil exports. Governments facing such economic windfalls have the opportunity to put in place a policy framework that puts the economy on a path of sustained growth.

13IRAN- NEW COMPETITOR & PARTNER OF TURKEY 14Source: WORLDBANK

Iran aims to expand its steelmaking capacity to 55 million tpy by 2025 (Reuters, 2014). Most new plants will be based on the DRI-EAF route. The country has significant resources of iron ore deposits and low-cost natural gas, and these factors are affecting the choice of raw materials used to produce steel in Iran. Although eight new steelworks have been under construction by state-owned IMIDRO since 2006, and numerous projects have been announced, a number of projects were put on hold because of financing constraints caused by economic sanctions.Iran is the biggest producer in MENA out of Turkey.Agreement with Western World will easy payment methods and sanctions.

14WORLDSTEEL CHANGED THEIR SHORT TERM OUTLOOK 15Source: STEELORBIS

Iron Ore decreased %42 in one year(98 to 56), at the same period scrap lost %41 (375 to 220)The difference of the product prices Chinese and Turkish 102 Usd/mt in average.When the difference is about 60 usd/mt in 2014 First Half, there was not big Chinese exports to Turkish markets.Scrap Prices started to decrease again due to the severe market conditions, however, EAF mills still not competitive against to ore based producers.

15RESULTS 16Source: WORLDSTEEL

16CONCLUSIONS 17

17CONCLUSIONS 18

18EMRAH UURSAL 03.09.2015

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