The construction sector in Türkiye continues to be the largest determinant of steel demand. Particularly, the ongoing residential and infrastructure projects in the southern regions are driving strong domestic demand. However, rising costs and uncertainties in financial markets are causing delays in some construction projects, posing a short-term risk for steel manufacturers.
Raw Material Prices
Recent increases in raw material prices have led to a significant rise in steel prices. For instance, CME iron ore prices have risen by 7% over the past month, reaching $113-114 per ton. HMS 80/20 scrap prices have increased nearly 8% in the last two weeks, reaching $351 per ton. These fluctuations have substantially raised production costs in the steel industry. Additionally, rising energy costs have put many steel manufacturers under severe pressure. All these factors have narrowed profit margins and threaten the sustainability of the sector.
Türkiye's Steel Production
Türkiye’s crude steel production reached 36.9 million tons, marking a 9.4% increase compared to the previous year. However, production in December fell by 7.6% year-on-year to 2.9 million tons. Final product consumption increased by 11.4% in December, reaching 3.3 million tons, while annual consumption rose by 0.6% to 38.3 million tons.
Türkiye's Steel Exports
In 2024, Türkiye's steel exports recorded a significant increase. In December, export volume rose by 16% to 1.3 million tons, while export value increased by 11.9% to $888 million. For the entire year, export volume increased by 27.6% to 13.4 million tons, and export value rose by 17.7% to $9.7 billion.
High Financial Costs
Rising financial costs in the steel industry are becoming more pronounced due to market fluctuations. Despite the Central Bank of Türkiye's decision to cut interest rates by 250 basis points, or 2.5%, in the last month, this has not fully reflected in the markets. Turkish Lira interest rates remain high, ranging from 46% to 50%. This situation negatively impacts investors and businesses in the sector, increasing costs and weakening competitiveness.
Growth Expected in the Steel Sector
In the coming months, Türkiye's steel sector is expected to continue taking steps toward growth. Particularly, increasing economic activities in Asia and Europe enhance Türkiye’s export potential. However, China’s excess production capacity and price competition are causing challenges for the Turkish steel sector in international markets. Despite these difficulties, the Turkish steel sector has the opportunity to enhance its competitiveness through innovation and a quality-focused approach. This will strengthen Türkiye's position in the international market and contribute to sustainable growth in the sector.
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