Proposed changes to European Commission (EC) regulations governing the scrapping of ships look set to give Turkey’s ship-breaking and metal-processing industries a significant boost by shutting out rivals in Asia from part of this lucrative trade.
Turkey is a major producer and exporter of processed metal products and holds the number one spot globally for the supply of reinforcement steel, or rebar. However, the slow pace of recovery in the global economy is expected to weigh on Turkey’s steel exports through 2015 and beyond.
While a significant contributor to GDP, Turkey’s steel sales have been affected by falling global demand in recent years. Total steel product exports for 2014 stood at 17.5m tonnes, down 4.5% on volumes the previous year, while revenue declined from TL37.70bn ($13.9bn) in 2013 to TL35.94bn ($13.3bn).
US a key partner
The US is a major destination for Turkey’s steel products. Data released by the American Iron and Steel Institute on April 27 showed Turkey shipped 392,000 tonnes of finished steel to the US in March, topped only by South Korea with 561,000 tonnes. Exports of finished steel from Turkey to the US for the first quarter of the year reached 980,000 tonnes, placing it second globally for sales. Turkey’s shipments to the US were up 109% year-on-year in the first three months of 2015, signalling higher demand in the recovering American market.
A significant percentage of the steel heading to North America was making a return journey to the US after undergoing processing at Turkey’s mills. In January Turkey imported 334,142 tonnes of scrap from the US, according to the International Trade Commission. Payments for metal imports totalled $120m, making Turkey the single largest destination for American scrap metal.
Turkey led the way in 2014 when it came to scrap metal imports, according to a report issued by the Steel Exporters’ Association. The country accounted for 21% of all scrap traded in 2012, with imports for the same year totalling 22.68m tonnes.
New rules for ship-breaking sector
Aside from scrap metal, Turkey also sources material for its steel industry from the ship-breaking sector, most of which is concentrated around the Aliağa region, near the city of Izmir. The sector is expected to gain from planned regulatory changes announced by the EC at the end of March, which are set to ban the breaking of European-flagged vessels in Bangladesh, India and Pakistan. The new rules, which are expected to come into effect in 2016, form part of a response to the poor workplace safety record of Asian yards and concerns over environmental damage.
The policy shift is likely to create new opportunities for Turkish breakers, while further weakening the hold of Asian yards. An estimated 60% of all vessels broken up in 2014 were dismantled in yards in India, Pakistan and Bangladesh.
Turkey could also have an edge on its new potential rivals following the policy shift, including China, North America and the EU itself. Experts suggest that high costs could lead to only a modest rise in the number of European-flagged, decommissioned vessels being taken to China and North America. EU member states, meanwhile, have limited capacity for ship-breaking, with figures showing that less than 4% of all ships scrapped in 2014 were dismantled in European yards, leaving Turkish firms well placed to expand their business.
The decision by Turkish breakers in 2014 to bid for the scrapping of the Costa Concordia – one of the most famous wrecks of recent years – served as a reminder that local firms have the capacity to handle some of the world’s largest ships. The 114,500-tonne cruise liner went aground off the Italian coast in 2012. The Aliağa yards were thought to have the inside running during the process, although the contract eventually went to a yard in Genoa. Lower towing costs were believed to be a deciding factor.
With one eye on increased demand and a possible stronger supply flow from Turkey’s scrapping yards, steel producer Kardemir announced plans in February to further boost output from its Karabük facility, having already lifted annual crude steel capacity from 1.8m tonnes to 3.4m as of January. Its plans signal confidence in the industry, while also laying the groundwork for an anticipated rise in global demand for steel products.
Source: spy Ghana. 29 May 2014