Industry feels the heat
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by Sevda Yüzbaşıoğlu - Referans
Oluşturulma Tarihi: Mart 14, 2009 00:00
ISTANBUL - The steep decline in commodity prices and falling global demand is threatening Turkish industries. Oğuz Özgen, chairman of Erdemir, the biggest steelmaker, says the firm may halt output unless it receives new orders. Representatives of other sectors also point toward the approaching danger
Contraction and a decline in demand across many sectors due to the crisis have turned commodity prices upside down. The threat caused by the sudden price declines in line with demand is a "spiral of death," according to Oğuz Özgen, managing director and chairman of Erdemir, who spoke earlier this week to announce 2008 results for Europe's eighth largest steel maker.
Erdemir, which posted a net profit of nearly 680 million Turkish Liras in 2007, reported a net profit of 211.47 million liras in 2008.
The leading steel manufacturer may halt output in a month if it received no new orders. Also, plans for $1.7 billion in new investments over the next several years may be frozen. Erdemir Chairman Coşkun Ulusoy also said the company had left its options open for further production cuts as it did not expect demand for steel to recover any time soon.
Besides iron and steel, many commodities, such as aluminum, wheat, rice and cement, are also increasingly feeling the wounds of the crisis.
Commodity prices set records in June and July last year, but have since displayed a downtrend due to a sharp drop in orders. Declines in some commodities since October have reached 70 percent. Still, some experts claim the bottom has not yet been hit and the fall will continue.
"If current conditions do not improve, we expect domestic demand for cement to contract about 10 to 12 percent and drop to 38 million tons. We last saw these figures in 2003, which proves we have regressed five years," said Adnan İğnebekçili, chairman of the Turkish Cement Manufacturers' Association, or TÇMB.
Capacity utilization in the cement industry has declined to 60 percent from 90 percent, said İğnebekçili, adding that cement prices have also dropped 27.7 percent in February compared to February 2008. "In addition to all that, energy costs, which increased rapidly in 2008, make a mess out of our profitability."
Steep decline in prices
Long product prices, which rose to $1,500 a ton last year, have declined to $350, said Veysel Yayan, secretary general of the Turkish Iron & Steel Producers Association. "In May, June, July and August last year, our exports stood at $2.5 billion. However, the figure was $820 million in November. The losses in scrap and final product stocks are added to the picture."
Turgay Yetiş, chairman of the Rice Millers Association, said orders declined 30 percent last month. "Rice prices range between 2,000 and 2,250 liras a ton, but there has been an increase recently. Demand declines as the price increases, which is happening because the prices of imported goods is rising with the dollar."
"After September, raw aluminum dropped rapidly from $3,000 to $1,340 per ton," said Bahadır Özer, vice managing director of Assan Alüminyum. The decline stems from dramatic drops in global demand, meaning global stocks are increasing, he said. "Although our domestic sales have grown by 10 percent on average for years, we saw a 7 percent contraction last year."
"This year, we expect to see a contraction of 30 to 50 percent in construction and automotive in both domestic and external markets. After construction and automotive, the contraction is likely to affect white goods and we predict around 5 percent contraction in demand in the packaging sector."
Erdemir, which posted a net profit of nearly 680 million Turkish Liras in 2007, reported a net profit of 211.47 million liras in 2008.
The leading steel manufacturer may halt output in a month if it received no new orders. Also, plans for $1.7 billion in new investments over the next several years may be frozen. Erdemir Chairman Coşkun Ulusoy also said the company had left its options open for further production cuts as it did not expect demand for steel to recover any time soon.
Besides iron and steel, many commodities, such as aluminum, wheat, rice and cement, are also increasingly feeling the wounds of the crisis.
Commodity prices set records in June and July last year, but have since displayed a downtrend due to a sharp drop in orders. Declines in some commodities since October have reached 70 percent. Still, some experts claim the bottom has not yet been hit and the fall will continue.
"If current conditions do not improve, we expect domestic demand for cement to contract about 10 to 12 percent and drop to 38 million tons. We last saw these figures in 2003, which proves we have regressed five years," said Adnan İğnebekçili, chairman of the Turkish Cement Manufacturers' Association, or TÇMB.
Capacity utilization in the cement industry has declined to 60 percent from 90 percent, said İğnebekçili, adding that cement prices have also dropped 27.7 percent in February compared to February 2008. "In addition to all that, energy costs, which increased rapidly in 2008, make a mess out of our profitability."
Steep decline in prices
Long product prices, which rose to $1,500 a ton last year, have declined to $350, said Veysel Yayan, secretary general of the Turkish Iron & Steel Producers Association. "In May, June, July and August last year, our exports stood at $2.5 billion. However, the figure was $820 million in November. The losses in scrap and final product stocks are added to the picture."
Turgay Yetiş, chairman of the Rice Millers Association, said orders declined 30 percent last month. "Rice prices range between 2,000 and 2,250 liras a ton, but there has been an increase recently. Demand declines as the price increases, which is happening because the prices of imported goods is rising with the dollar."
"After September, raw aluminum dropped rapidly from $3,000 to $1,340 per ton," said Bahadır Özer, vice managing director of Assan Alüminyum. The decline stems from dramatic drops in global demand, meaning global stocks are increasing, he said. "Although our domestic sales have grown by 10 percent on average for years, we saw a 7 percent contraction last year."
"This year, we expect to see a contraction of 30 to 50 percent in construction and automotive in both domestic and external markets. After construction and automotive, the contraction is likely to affect white goods and we predict around 5 percent contraction in demand in the packaging sector."