The United States imports iron and steel products from 27 countries around the world, including Turkey. As Turkey’s exports to the United States reached 642.7 million dollars in the first 10 months of 2008, and even though there were certain setbacks recently, Turkey is still assertive in the American market when it comes to construction iron (Bars-Reinforcing). At the end of 2006, with 1.1 million tons of construction iron, Turkey was the largest supplier to the United States. Turkey transcended the setback in the iron bar market in America by directing itself to the Persian Gulf.
Istanbul Iron and Steel Exporters’ Association President Serdar Koçtürk spoke to TURKOFAMERICA about the structuring of the iron-steel sector and the demands of the American market during this economic crisis.
Could you speak especially about how the iron steel sector, which at the end of 2006 had reached 1 billion dollars in exports to the United States, fell to 300 million dollars in 2007 and 491 million dollars in the first nine months of 2008? What kind of expansion did the Turkish iron steel sector make during this time in the export market?
To evaluate Turkey’s iron steel exports to the United States on a value base would not be healthy due to the extreme fluctuations of the unit price. It would be healthier to evaluate it on a quantity base. If you look at it from a value base, then Turkey’s exports to the United States reached 642.7 million dollars in the first 10 months of 2008. Last year it had reached 264.4 million dollars in the first ten months. When looked at on a value base that is an increase of 143% but at a quantity base there is only a 40% increase.
When the export product base is examined in the iron bar exports in question there was an export of 359 thousand tons last year and this export has deteriorated in the past ten months to 224 thousand tons. However there has been an increase on other items. Turkey also exports pipes, HRP steel and wire rod to the United States. Our pipe export has reached 116.4 thousand tons in the first ten months, our wire rod export reached 111 thousand tons and our HRP steel export reached 116 thousand tons. There were serious increases in the exports of these three products.
Due to the problems faced in the American market when it came to iron bars, Turkey changed its course to the Persian Gulf and with the increase in the price of oil and the increase in the investments in this area there was a larger share of the market to be had.
Is there a possibility that the United States will not import Turkish iron bars, therefore jeopardizing its own sector in the meantime? (As far as I know Turkey imports the raw materials for the iron bars from the United States)
Turkey is the largest buyer when it comes to American iron and steel scrap exports. Turkey’s yearly iron and steel scrap imports in 2007 reached 17.1 million tons. 3.9 million tons of this was from the United States market. In the first 6 months of 2008 2.3 million tons of iron and steel scrap was imported from the American market. The monetary value of this is over a billion dollars in six months. In other words, the volume of our iron and steel scrap imports is higher in value then our steel exports.
It is a fact that the companies within the iron steel sector in Turkey have proven experience, knowledge and capital accumulation in this area. Besides new export ventures, is it possible to follow a strategy of “investing specifically within the United States in order to be close to the customer and to make a place for oneself as a direct manufacturer in the market”?
It is very logical for Turkish manufacturers to invest in the United States. The United States is the largest iron and steel scrap supplier in the world. It also imports long steels. It can be foreseen that in the event that Turkey does not fill this void, others will fill it. We see that there are steps in this direction already. However, due to this period of economic crisis, it looks like the Turkish investor is not in a place currently to undertake such a venture.
In the month of August 2008 alone, the import of iron steel and products from the United States reached over 400 million dollars. As of the end of September 2008 the requests for iron steel imports were at 2.684 million tons. When we look at iron steel, which is our largest import to the United States of all of our imports, doesn’t it take a large piece of the pie when compared to the United States Market?
Your observation is correct. The United States is the largest importer in the world. Even though our share in this market is small, in the context of all the goods that are sold in this market the United States takes a huge share of our exports. For example in the first ten months the United States was the largest customer when it came to our export of HRP steel. For wire rod and pipes it was the third largest market.
This current economic crisis has deeply affected the construction sector in the United States; to what degree will it have an effect on the Turkish exporter?
The effects of this crisis will be serious and there will be a setback in our export numbers. However, due to the decrease in oil prices and freight costs our competition level in the market has only gotten stronger.
The increase in the value of the dollar these last few days is said to make those in the export business happy, but isn’t it a disadvantage for those producers who buy their raw materials based on the dollar?
There is no problem for the manufacturer who buys raw materials on the dollar and then sells them on the dollar. The increase in the dollar value can be an advantage for those who buy raw materials with the New Turkish Lira, and for those in fields where it is labor based. These are sectors such as foods and textiles. However, since devaluation is present in many countries, the competitive field has not created an advantage.
Will a new strategy be decided for the American market going on the prediction that by 2010 it will have recovered its past strength? The role of the United States in Turkey’s complete export picture may be small, but when the Unites States limits its consumption, then the manufacturer in Turkey also gets affected. Is there a date you foresee for the effects of the economic crisis to end and for normalcy to return to Turkey?
The American market is important for Turkey and our Undersecretariat of the Prime Ministry for Foreign Trade values this market and is working on developing strategies for increasing the export numbers. Due to the fact that the United States is the world’s largest net steel importer, it is important to Turkish steel manufacturers and exporters. This mutually beneficial business trade will continue to grow after this crisis is over and new opportunities will abound. We foresee that the effects of this economic crisis will start to abate towards the second half of 2009 and that the trend of growth will restart.