Over the last three months of 2022, the capacity utilization rate has dropped to 60%

Turkish factories are considering shutting down production due to high energy costs. In 2022, steel production in the country will decrease by more than 10%. Veysel Yayan, secretary general of the Turkish Steel Producers’ Association (TCUD), reports about it in the interview for Turkish Cumhuriyet.

A 600% increase in energy prices is unsustainable and it should be normalized, he said. At the same time, Turkish steel producers are unable to reflect this in their prices. According to the secretary general of TCUD, there may be companies that will temporarily stop production, and this can be heard soon.

In 2021, the level of capacity utilization of Turkish enterprises was 75%. In the last three months of 2022, it has dropped to 60%, and there is a tendency to fall further.

In the first quarter of 2022, global steel production fell by 5.5%, while Turkiye’s production fell by 2.5%. However, according to Veysel Yayan, today Turkiye lags behind the rest of the world.

“The EU provides energy support to its producers. Our state should also support producers,” he said.

If energy prices continue to increase, a rise in steel prices is inevitable, Veysel Yayan believes. He also notes that the situation with market demand is changing a lot, and companies are trying to maintain stocks on it.

According to TCUD, in August 2022 steel production in Turkiye fell by 21% compared to the same month of the previous year – to 2.8 million tons. For 8 months of 2022, production decreased by 8.8% y/y – to 24.4 million tons.

In 2022, according to Veysel Yayan, steel production is likely to decline by more than 10% (it was previously predicted that it would increase by 10%).

“Over the past three months, average monthly production has fallen by 18.3%, and exports by 14.3%. In addition, these reductions do not reflect the 50% increase in electricity and natural gas prices on August 30 and the negative impact of the new regulation adopted by BOTAS (state-owned energy importer) on September 29. This situation shows that the last quarter of the year will be more difficult for our steel industry,” said Veysel Yayan.

One of the main markets for Turkiye’s steel producers is Europe, where quotas apply to Turkish products. However, TCUD hopes that they will be weakened by the new year. At present, there are more than 100 steel plants in Turkiye. Direct employment in the sector exceeds 100 thousand people, while indirect employment is about 500 thousand.

According to the Turkish Steel Exporters Association’s (CIB) data, for 8 months of 2022, the volume of exports of Turkish steel in monetary terms amounted to $17 billion. The goal for 2022 was $25 billion, however, it is likely that the year will be closed with the same indicator as 2021 – $21 billion

As GMK Center reported earlier, Turkiye has raised prices for electricity and gas for industry by 50% since September. The regulatory agency explains that the increase in the electricity prices is related to the recent increase in prices of energy resources, especially under the influence of the war in Ukraine.