33
- 1 - SSS Conference XXVII – USA / June 19, 2012
- 1 -SSS Conference XXVII – USA / June 19, 2012
- 2 -SSS Conference XXVII – USA / June 19, 2012
Content
• Iron and Steel Industry in Turkey
• ERDEMİR Group
- 3 -SSS Conference XXVII – USA / June 19, 2012
Iron and Steel Industry in Turkey
- 4 -SSS Conference XXVII – USA / June 19, 2012
GDP Growth Rates (%)
Source: IMF – TRG (Turkish Republic Government)
Turkish GDP is expected to grow at above 4% per annum over the medium term
5.3
3.9 3.54.1
3
1.7 2.12.4
1.91.4
-0.3
0.9
98.5
45
-1.0
1.5
4.0
6.5
9.0
2010 2011 2012 F 2013 F
Dünya ABD Euro Bölgesi TürkiyeWorld USA Euro Zone Turkey(%)
- 5 -SSS Conference XXVII – USA / June 19, 2012
13 9 11 14 15 18 21 24 21 18 24 27 29 30 33 36 38 41 44 47 50
80
117
197
0
40
80
120
160
200
240
0
10
20
30
40
50
60
2000
2002
2004
2006
2008
2010
2012
F
2014
F
2016
F
2018
F
2020
F
Finished Steel Consumption (Mt) GDP Index (2005=100)
2000-2010 2010-2020GDP Index – CAGR (%) 3.9 5.3Finished Steel Cons. – CAGR (%) 6.1 7.9
Finished Steel Consumption and GDP of Turkey
Source: ISPA (Turkish Iron & Steel Producers Association), Oxford Economics
- 6 -SSS Conference XXVII – USA / June 19, 2012
Liquid Steel Capacity (Mt) of Turkey
Source: ISPA
13.6 18.826.1 29.8 33.4 36.4 38.56.2
6.3
8.08.5
9.410.7 11.6
72%
83%79%
66% 68%72% 74%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
0
10
20
30
40
50
60
70
2000 2005 2008 2009 2010 2011 2012 T
Elektrik Ark Ocağı Entegre Tesis Sıvı Çelik Kapasite Kullanım Oranı (%)BOF EAF Capacity Utilization (CU)
CAGR of Turkey’s Liquid Steel Capacity between 2000 and 2012 was 8.0% and is expected to reach 50.1 Mt in 2012.
During the same period the average CU rate was 75%
F
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Top Steel Producing Countries – Crude Steel (Mt)
Rank Countries 2011 2010 Change %1. China 683 628 8,92. Japan 108 110 -1,83. United States 86 80 7,14. India 72 68 5,75. Russia 69 67 2,76. South Korea 68 59 16,87. Germany 44 44 1,08. Ukraine 35 33 5,79. Brazil 35 33 6,8
10. Turkey 34 29 17,011. Italy 29 26 11,312. Taiwan, China 23 20 14,713. Mexico 18 17 8,614. France 16 15 2,415. Spain 16 16 -4,6
Turkey was ranked 10th position among Top Steel Producing Countries in 2011
Source: ISPA
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Crude Steel Production Growth Rates (%) 11.4
9.2
5.43.9 3.6 3.4
1.9 1.70.8
-1.4 -3.8 -5.0 -8.9 -11.4 -14.9
The Largest 15 Producers (Jan-Apr 2012)
Turkey moved to 8th position among Top Steel Producing Countries between January and April 2012
Source: ISPA
Turk
ey
US
Fran
ce
S.Ko
rea
Russ
ia
Italy
Chin
a
Mex
ico
Ger
man
y
Taiw
an
Ukr
aine
Spai
n
Braz
il
Indi
a
Japa
n
- 9 -SSS Conference XXVII – USA / June 19, 2012
Finished Steel Production/Consumption (Mt) – Turkey
Source: ISPA
16 19 22 22 21 20 23 25
44 4 5 4 7
9 10
Long Flat
9 11 12 10 10 12 14 15
9 11 12 11 812
13 14
2005 2006 2007 2008 2009 2010 2011 2012*
Production
Consumption
2023 26 27 25 27
32 35
1822
2421
1824
27 29
F
- 10 -SSS Conference XXVII – USA / June 19, 2012
5.66.8 6.4
3.62.4
2.2
0.7 1.11.3
2009 2010 2011
Long Products
Semi Products
Flat Products
Iron and Steel Imports of Turkey (Mt)
Turkey imported 6.4 Mt of flat steel products in 2011 even though it has an unused flat steel production capacity of 6.6 Mt
Source: TSI (Turkish Statistical Institute)
9.910.3
9.9
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3.94.8 4.5
5.44.6
4.2
0.5 0.80.9
2009 2010 2011
Regional Distribution of Imports (Mt) – Turkey
Imports from CIS countries represents 46% of total Turkish imports
9.910.39.9
EU
CIS
Far East
Other
Source: TSI
- 12 -SSS Conference XXVII – USA / June 19, 2012
Iron and Steel Exports of Turkey (Mt)
15.914.4
15.2
1.7 1.5 2.3
2.4 3.7 2.5
11.8 9.2 10.5
2009 2010 2011
Long Products
Semi Products
Flat Products
Source: TSI
- 13 -SSS Conference XXVII – USA / June 19, 2012
6.5 7.35.4
5.8 3.74.8
2.02.0 3.2
0.30.6
0.81.2
0.80.8
2009 2010 2011
CIS
Far East
NAFTA
Other
EU and Other FTA
MENA
Regional Distribution of Exports (Mt) – Turkey
*Other: Brazil, Peru, Ethiopia, Turkmenistan, Nigeria etc.Source: TSI
Turkey exports mainly to MENA and EU countries
15.9 14.4 15.2
- 14 -SSS Conference XXVII – USA / June 19, 2012
Scrap Consumption (Mt) of Turkey
Source: ISPA
1013 13 13 15 17 17 16
19 21 2342 4 4
55 6
6
6
910
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012*
Imported Local
Turkey imports over 70% of its scrap consumption
1317
2022 23
22
25
33
31
1517
F
- 15 -SSS Conference XXVII – USA / June 19, 2012
Iron Ore Consumption (Mt) of Turkey
BF hot metal capacity in Turkey is 11.0 Mt
5.0 5.0 4.4 4.67.2 6.9
5.0
7.8 7.25.9
3.5 3.6 4.1 4.0
3.9 3.9
3.5
4.3 5.46.4
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Imported Local
8,5 8,5
11,1 10,8
8,5
12,1 12,6 12,3
8,6 8,6
- 16 -SSS Conference XXVII – USA / June 19, 2012
Iron Ore Production (2011, Mt) of Turkey
ERDEMİR’s self sufficiency in Iron Ore is over 35%(including local captive suppliers)
2.844%3.6
56%
ERDEMIR's Production
Other
Total Production: 6.4 Mt
- 17 -SSS Conference XXVII – USA / June 19, 2012
Turkey’s Coking Coal Consumption (Mt)
Turkey’s coking coal consumption was about 5 Mt in 2011
3.5 3.64.7
4.1 4.3 4.3
0.5 0.6
0.60.7
0.7 0.7
2006 2007 2008 2009 2010 2011
Imported Local
4.0 4.2
5.34.8 5.0 5.0
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ERDEMİR Group
ERENCO
ERDEMİR Romania
ERMADENERSEM
- 19 -SSS Conference XXVII – USA / June 19, 2012
Group Companies
2001 2002 2004 2006 2008 2012
Establishment
Establishment of ERSEM and
ERENCO
Acquisition ofİSDEMİR and ERD.Romania
Acquisition ofERDEMİR Maden
Privatization
Flat steel production in
İSDEMİR
1965
- 20 -SSS Conference XXVII – USA / June 19, 2012
Capital Structure
OYAK purchased 49,3% of ERDEMIR shares held by Turkish Privatization
Authority on Feb. 27, 2006.
OYAK49,3%
ERDEMİR3,1%
Public47,6%
- 21 -SSS Conference XXVII – USA / June 19, 2012
5.4 5.4 5.4
7.0 7.07.9
9,10
3.2 3.2 3.2 3.5 3.5 3.9 3,85
2.2 2.2 2.2
3.5 3.54.0
5,25
2005 2006 2007 2008 2009 2010 2011
ERDEMİR İSDEMİR
Liquid Steel Capacity (Mt) – ERDEMİR Group
After the privatization of ERDEMİR, liquid steel capacity of the group increased by 70% to 9.1 Mt
Privatization
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6.1
7.6 7.6
11.1 11.1 11.1 11.1
3.65.1 5.1 5.1 5.1 5.1 5.1
3.5 3.5 3.5 3.5
2.5
2.5 2.5
2.5 2.5 2.5 2.5
2005 2006 2007 2008 2009 2010 2011
Total ERDEMİR Flat İSDEMİR Flat İSDEMİR Long
Finished Steel Capacity (Mt) – ERDEMİR Group
Privatization
The finished steel capacity of the group increased by 82% to 11.1 Mt following the privatization of ERDEMİR
- 23 -SSS Conference XXVII – USA / June 19, 2012
3.2 3.5 3.6 3.8 3.9 4.2 4.2 4.8 5.4 6.11.7 1.9 2.2 2.1 2.1 1.7 1.9
1.9 1.4 0.84.6 4.9 5 5.2 5.2 5.46
6.57.1
7.5
0
1
2
3
4
5
6
7
8
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
012345678910
Flat Product Long Product Crude Steel
Group Long product portion decreased over time in line with İSDEMİR’s conversion to Flat production
Production Volume (Mt) – ERDEMİR Group
Privatization
- 24 -SSS Conference XXVII – USA / June 19, 2012
Sales (Billion $)
Since privatization in Feb. 2006, annual revenues increased by 71% to 5.3 B$
0.9
1.8
3.1 3.13.4
4.1
5.2
3.4
4.4
5.3
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Privatization
- 25 -SSS Conference XXVII – USA / June 19, 2012
Products & Markets
ERDEMİR is a regional steel hub between European and MENA markets with a diversified product portfolio
• Flat Products
HRC
Plate
CRC
HDG
Tinplate
Silicon Steel
• Long Products
Wire rod
Billet
• Domestic Markets
Turkey
Romania
• Export Markets
EU
Other Europe & CIS
MENA
USA
- 26 -SSS Conference XXVII – USA / June 19, 2012
Flat Product Domestic Sales (2011)
Shipments to automotive, white goods, general manufacturing and packaging are growing
Pipe and Profile Manufacturers
34%
Automotive & White Goods
16%
General Manufacturing
11%
Packaging4%
Service Centers13%
Re-rollers11%
Wholesale Trade11%
- 27 -SSS Conference XXVII – USA / June 19, 2012
Financial Indicators – EBITDA
ERDEMİR Group generated 1.2 B$ EBITDA in 2011
0.5 0.8 0.8 0.6 0.2 0.9 1.2
15
23
20
11
7
2123
0
5
10
15
20
25
0
0.3
0.6
0.9
1.2
1.5
2005 2006 2007 2008 2009 2010 2011
EBITDA (B$) EBITDA Margin (%)
- 28 -SSS Conference XXVII – USA / June 19, 2012
Financial Indicators – Net Profit
The annual average net profit improved significantly after the privatization
0.1 0.5 0.5 0.2 -0.1 0.5 0.6
5
1413
3
-3
1211
-4
0
4
8
12
16
-0.2
0
0.2
0.4
0.6
0.8
2005 2006 2007 2008 2009 2010 2011
Net Profit (B$) Net Profit Margin (%)
- 29 -SSS Conference XXVII – USA / June 19, 2012
Market Share (Turkey) – Flat Products
Entry by new local producers in to HRC market created excess local capacity
ERDEMIR Group33%
Other Domestic Producers
26%
EU19%
CIS16%
Other Countries
6%ERDEMIR Group25%
Other Domestic Producers
9%EU
29%
CIS33%
Other Countries
4%
2007 2011
- 30 -SSS Conference XXVII – USA / June 19, 2012
Group Steel Service Centers
ERDEMIR SSC1.1 Mt
ISDEMIR SSC1.0 Mt
ERSEM SSC0.2 Mt
AegeanSSC
Central Anatolia SSC
YarımcaSSC
Existing 2.3 Mt
Planned ~2.0 Mt
- 31 -SSS Conference XXVII – USA / June 19, 2012
New Competitive Challenges
• Global excess capacityShipments from Far East to EU & MENA markets at unrealistic price levels, resulting in price erosion
• Certain producers with own mines damping products at unsustainable price levels
Market share erosion
• Unbalanced product – market mix, excess HRC capacity in Turkey
Intense competition in commercial grade products
• High volatility in regional markets: MENA & EU
Volatility in prices and demand, resulting in low capacity utilization
- 32 -SSS Conference XXVII – USA / June 19, 2012
Mar
ket
Pow
erPr
ofit
abili
ty
Strategic Priorities
Expanding SSC Network
Expanding Cold and Galvanizing Capacity
New R&D Center
Getting closer to customers
Moving to higher value add products
Strengthen NPI
Reducing and / or spinning offnon-core assets
Solving production bottlenecks, improving quality and reducing costs
Start to develop Hasancelebi Iron Ore Mine (Own Mine in Turkey)
Increase ROA
Increase profitability
Increase self sufficiency in raw materials
- 33 -SSS Conference XXVII – USA / June 19, 2012
Thank you for your attention…
