Steel consumption in Turkey: upward trend

Domestic demand for steel in January-October 2025 increased by 2.6% – to 32.2 million tons, according to the Turkish Steel Producers Association (TCUD). This was driven by both growth in domestic production (by 1.2% – to 31.3 million tons) and imports (by 13.8% – to 15.6 million tons).

The upward trend reflects the favorable macroeconomic situation. Turkey’s actual GDP grew by 2.3% in the first quarter and 4.8% in the second quarter. It is very important that this is sustainable growth. The Turkish economy has not experienced a recession for 20 consecutive quarters. Accordingly, the main consumers of steel feel quite confident.

The impact of macroeconomics

The main driver can be considered the significant devaluation of the Turkish lira, which began in 2021 and continues to this day.

On the one hand, this has increased the competitiveness of Turkish exporters, particularly car manufacturers, who are the main consumers of flat-rolled steel, as their costs in dollar terms have decreased. Exports are also of great importance to Turkey’s construction industry, the main consumer of long-rolled steel.

On the other hand, the devaluation of the lira and the associated high inflation are forcing Turkish households to consider buying new cars, houses, and apartments as an investment to protect their savings.

This approach has become particularly attractive this year after President Recep Erdogan issued a decree on July 9 raising income tax rates on short-term deposits (up to 6 months) from 15% to 17.5% and on deposits up to one year from 12% to 15%. The tax on income from mutual investment funds was also raised from 15% to 17.5%, except for long-term real estate funds.

In this way, the authorities are encouraging citizens to spend money rather than keep it in bank accounts. Moreover, households maintain high purchasing power despite devaluation.

This was facilitated by a 30% increase in the minimum wage to ₺22,104 on January 1. As a result, the share of workers’ wages in gross value added at current prices was 43.7% in the first quarter, compared to 41.7% in 2024, according to the Turkish Statistical Institute (TUIK).

Accordingly, final household consumption increased by 3.9% y/y in the first quarter and by 2% in the second quarter. The state also began to spend more. Its final consumption expenditure increased by 1.6% and 1.2%. All this affected the indicators achieved by steel-consuming industries.

Market situation

Passenger car and commercial vehicle production rose 3.6% to 1.163 million units in January-October, according to the Turkish Automobile Manufacturers Association (OSD). Domestic sales grew at a faster pace, by 9.6% – to 1.079 million units, indicating strong demand. Foreign sales increased by 4.7% – to 864,800 units, thanks to a trade agreement with the European Union that exempts new cars from Turkey from import duties.

Amid this, the sharp deterioration in agricultural machinery performance is particularly noticeable. Tractor production in January-October fell by 40% – to 23,590 units. This is due to problems in the agricultural sector. According to the forecast of the Ministry of Agriculture and Forestry of Turkey, in 2025, grain production will decrease by 12.4% – to 34.2 million tons, vegetables by 0.8% – to 33.3 million tons, and fruits by 30.4% – to 19.8 million tons.

The situation is not entirely favorable in the household appliances segment, another major consumer of sheet steel. According to the industry association TURKBESD, production and exports fell by 9% in January-October, while domestic sales fell by 5%.

At the same time, exports in October fell by 15% year-on-year, to 2 million units. Production in October decreased by 9% – to 2.54 million units, despite an 8% increase in domestic sales to 836,000 units. This indicates large inventories accumulated by manufacturers during the year and highlights the industry’s significant dependence on external markets.

The export component is also very important for the construction sector, the main consumer of long-length rolled products. Turkey is among the top 10 countries that are the largest exporters of construction services. In January-September 2025, Turkish companies implemented foreign projects worth $9.2 billion, according to the Ministry of Trade.

When carrying out work, they try to use Turkish steel as much as possible. For example, Doğuş Grubu used Turkish-made steel pipes to build a 3 km cable-stayed bridge across the Dnieper River in Kremenchuk, Ukraine.

Domestic demand also stimulated growth in the construction sector. In January-September, housing sales by developers increased by 19.2% y/y – to 1.129 million units, according to the Turkish Contractors Association (TMB). At the same time, in the first half of the year, the area of housing commissioned increased by 30.2% – to 58.45 million m².

Industrial construction grew primarily due to the energy sector. And here, from the point of view of steel consumption, wind energy is the most important. In the first half of 2025, new wind farms with a total capacity of 593 MW were commissioned in Turkey. This is 38% more than in the same period a year earlier.

Overall, the industry’s stable position is worth noting. April-June 2025 was the 11th consecutive quarter with positive growth in construction volumes. The growth began after the devastating earthquakes in February 2023, which required the restoration of a huge number of buildings, residential houses, and infrastructure facilities.

Steel demand outlook

Steel consumption in Turkey continues to recover after a decline in 2022. However, the pace has slowed somewhat, and it will certainly not be possible to repeat the record result of 2021 this year. At the same time, forecasts for the main steel-consuming industries give reason to expect the upward trend to continue in 2026.

Since the Turkish automotive industry is strongly export-oriented, domestic demand was largely met by imports. In January-October, it grew by 11.8% – to 764,700 units. The main destinations remained Russia, China, and the US. This is despite the 40% import duty on Chinese cars, which has been in effect since July 7, 2024.

However, the situation will soon change. By Presidential Decree No. 10436, Recep Erdogan introduced import duties on cars from non-EU countries. For gasoline and diesel cars, the duty is 25%, but not less than $6,000; for hybrids and electric cars, it is 30%, but not less than $7,000 and $8,000, respectively.

These tariffs came into effect on November 22. Given that the average selling price of a car in Turkey is $27,800, they can be considered protective. This means that in the near future, the market share previously held by importers will shift to local car manufacturers, which will be able to increase production and, accordingly, begin to purchase more rolled steel.

In addition, the launch of two new car factories in 2026 — by the Chinese concern BYD and South Korea’s Hyundai — will contribute to the growth in production. Both projects will start operating in the second half of the year. The Chinese car factory will have a capacity of 150,000 cars per year. Moreover, this is not about large-scale assembly, but about full-fledged production: the agreement with the government also provides for the transfer of technology.

It is expected that the European Union will be the main market for the new enterprises. Thus, all the prerequisites are in place for the government to achieve its plans to reach car exports of $39.2 billion in 2025 and $43.7 billion in 2026. The index of production of cars (including auto parts) and other wheeled vehicles is expected to grow by 26.7% in 2025 and 31.5% in 2026.

The existence of large long-term foreign contracts provides additional grounds for optimism. For example, in October, Tofas agreed with the American automotive group Stellantis to export 230,000 light commercial trucks to North America in 2026–2032.

The construction industry also has a significant backlog of projects for next year. The number of permits for new construction in January-June 2025 increased by 61.8%, with the total area of new facilities amounting to 54.36 million m². Of these, 37.8 million m² will be residential, and 6.2 million m² will be industrial and warehouse buildings. In July-August, the number of buildings that received building permits increased by 22.3%, and their total area increased by 42.6%.

Irish research company Research&Markets forecasts a 4.2% increase in construction output in Turkey in 2025 and a 3.7% increase in 2026. Among the main drivers are the continuation of government programs to restore destroyed housing stock and the development of green energy. And this is not just wind energy.

The state program envisages an increase in the capacity of small hydropower plants by 1 GW from the current 2.7 GW in 2026–2030. Turkish companies will also continue to build large facilities abroad.

In particular, in August 2025, Orta Asya Yatırım Holding signed an agreement with the Kyrgyz government to build six hydropower plants with a total capacity of 2.2 GW. The estimated cost of the project is $6.3 billion. As before, builders will seek to make maximum use of Turkish-made steel.

It is also worth noting the government’s plan to expand the railway network from 13,919 km in 2024 to 17,500 km by 2028. This will require significant volumes of rails and steel products.

Thus, domestic demand for steel in Turkey will remain positive in 2025 and beyond in 2026. It will be supported by stable economic growth. The government plan adopted in September forecasts GDP growth of 3.3% in 2025, 3.8% in 2026, 4.3% in 2027, and 5% in 2028.