Turkish Steel Industry s Interaction with MENA ADALAT KAZIMLI, Marketing and Sales Director International Trade, December, 214 1/23
ISDEMIR Port 2/23
World GDP Growth Emerging countries are the driving force of the global economy 29 213 Developed Countries : (%2 of World GDP growth) Emerging Countries : (%8 of World GDP growth) 8 7 6 5 4 3 2 1 Developed Countries Emerging Countries 27 28 29 21 211 212 213 Source : IMF, WorldBank 3/23
World Steel Consumption Decreasing growth of the global economy has a negative impact on the steel consumption WSA Estimates (June 214) Mton % Change 1,8 15% 1,6 1,4 1,2 1, 1219 1219 7.% 1141 13.9% 13 143 143 7.9% 1481 151 154 1% 5% 8 6.% 1.9% 3.6% 2.% 2.% % 4 5% 2 6.4% 27 28 29 21 211 212 213 214 215 1% Source : WSA 4/23
Top Steel Producing Countries Turkey ranks 8th in the world and 2nd in the EU Ranking Ranking 212 213 Change 213 9 214 9 Change Country 213 212 (Mt) (Mt) (%) (Mt) (Mt) (%) 1 1 China 731 779 7,5 64 618 2,3 2 2 Japan 17 111 3,1 82 83,8 3 3 U.S.A. 89 87 2 65 66 1,6 4 4 India 77 81 5,1 61 62 1,8 5 5 Russia 7 69 1,5 52 53 3,1 6 6 South Korea 69 66 4,4 49 53 9,4 7 7 Germany 43 43 32 33 2,5 8 8 Turkey 36 35 3,4 26 26,3 9 9 Brazil 35 34 1 26 25 1,3 1 1 Ukraine 33 33,5 25 21 14,2 World 1.559 1.66 3 1.25 1.231 2,1 Source : WSA 5/23
Chinese Steel Market 8 China's Steel Consumption Forecast 7 6 5 4 3 2 1 * estimated ** forecasted Growth Period 24 25 26 27 28 29 21 211 212 213 214* 22**23** Many studies reveal that high growth period ended for Chinese steel consumption and it will show stabilizing or declining tendency in the long term. As a result of the stabilizing or even decreasing consumption, Chinese steelmakers are expected divert increasing surplus production to the export markets more aggressively. Source : WSA 6/23
Chinese Steel Market Basic Figures for Chinese Steel Industry (million tons) 213 214* Capacity (Crude Steel) 1.16 1.14 Capacity Surplus (Crude Steel) 32 315 Steel Export (Semis + Finished Steel) 62 82 Net Steel Export (Semis + Finished St.) 48 67 214 H1 yoy % Annualized Crude Steel Use 377,4 754 Crude Steel Production 412 3, 824 Steel Export 41,1 33,6 82,2 Steel Import 7,6 4,4 15,2 Net Steel Export 33,5 42,5 67 * estimated Source : WSA 7/23
Global Trade 1 Growth of International Trade (%) 5 5 1 5Q1 5Q2 5Q3 5Q4 6Q1 6Q2 6Q3 6Q4 7Q1 7Q2 7Q3 7Q4 8Q1 8Q2 8Q3 8Q4 9Q1 9Q2 9Q3 9Q4 1Q1 1Q2 1Q3 1Q4 11Q1 11Q2 11Q3 11Q4 12Q1 12Q2 12Q3 12Q4 13Q1 13Q2 13Q3 13Q4 14Q1 14Q2 Number of Total Trade Barriers in 212 and 213 USA 212 : 11 213 : 4 Brazil 212 : 47 213 : 54 China 212 : 9 213 : 11 India 212 : 21 213 : 29 Growth of international trade decline due to the slowing economic activity This leads to an increase in trade barriers for all products in global market 8/23
Steel Market MENA MENA steel demand grows, but uncertainties remain MENA Apparent Steel Use [mton] +7, mt 72.1 67.6 65.5 213 214 215 Country 13/12 14/13 15/14 MENA 1,8% 3,3% 6,6% IRAN 8,% 3,1% 4,1% EGYPT 5,% 6,5% 9,6% KSA 9,5% 7,2% 4,2% UAE 3,% 3,% 1,4% MOROCCO ALGERIA TUNISIA IRAQ KUWAIT EGYPT KSA QATAR OMAN Source : WSA, WSD 9/23
GDP Growth Rates MENA GDP Growth (constant prices, percent change) 1% 8% 6% 4% 5.9% 2.5% 3.6% 7.1% 9.2% 5.3% 6.8% 5.8% 5.3% 2.4% 5.5% 4.5% 4.8% 2.3% 2.6% 2% % 2 21 22 23 24 25 26 27 28 29 21 211 212 213 214 F TURKEY GDP Growth (constant prices, percent change) 1% 8% 6% 4% 2% % 2% 4% 6% 8% 9.4% 8.4% 9.2% 8.8% 6.8% 6.2% 6.9% 5.3% 4.7% 4.1% 2.1% 3.3%.7% 5.7% 4.8% 2 21 22 23 24 25 26 27 28 29 21 211 212 213 214 F 1/23
Steel Market MENA Turkey s steel export to MENA Region decreased by 2 % in 214 due to political instabilities Turkey's Long Product Exports to MENA Region 5,477 5,495 4,154 3,283 212 213 213/Q3 214/Q3 Turkey's Flat Product Exports to MENA Region 253 241 187 171 212 213 213/Q3 214/Q3 Source : TSI 11/23
Steel Market Turkey MTon 4 3 2 1 Turkish steelmakers are heavily dependent on scrap Long products constitiute >7% of total production Finished Steel Production Finished Steel Consumption 36 3 25 26 27 28 29 21 211 212 213 214 TF Finished Steel Consumption Crude Steel Production Finished Steel Production 29% 27% 47% 53% Long Flat 71% EAF BOF 73% Long Flat Source : TISA 12/23
Turkish Steel Industry Capacity utilization rate is estimated to be 61 % in 214 Turkish crude steel capacity is increased by 2.5 times in the last 1 years Only 3 out of 31 producers are integrated steel makers 6 Total Production Total Capacity Total Utilization Rate (%) 1 5 83 85 8 9 8 4 66 56 6 66 67 62 61 7 6 3 5 2 4 3 1 21 25 23 28 26 32 27 4 25 45 29 49 34 52 36 54 35 56 34 56 25 26 27 28 29 21 211 212 213 214T F 2 1 Source : TISA 13/23
Turkish Steel Industry Flat steel production capacity has increased significantly since 26 Flat Steel Production Flat Steel Capacity Long Steel Production Long Steel Capacity Mton 18 16 14 12 1 8 CapacityUtilization (%) 97 98 79 37 39 55 62 56 53 58 1 9 8 7 6 5 4 Mton 45 4 35 3 25 2 Capacityl Utilization (%) 81 83 81 78 63 62 68 71 66 62 1 9 8 7 6 5 4 6 3 15 3 4 2 1 2 2 4 3 4 3 4 5 5 11 4 12 7 13 9 16 9 16 116 116 1 5 1622 1925 2227 2229 2133 235 2336 2538 274 264 1 Source : TISA 14/23
Turkey s Indicators Turkey continues to be one of the most important trade partner on Steel Industry for MENA region Flat Products Export 214 Long Products Export 214 Other 14% Far East 4% CIS 8% EU(28) 39% Far East 1% CIS 1% Other 2% EU(28) 27% MENA 1% NAFTA 25% MENA 39% NAFTA 12% Source : TSI 15/23
Raw Material Imports Turkey is a net importer of iron ore and scrap EAF production is 7 % of total Turkey s crude steel production. Turkey is the biggest scrap importer in the world (2 mtpy), local scrap supply is around 1 mtpy Iron Ore Imports [mton] 1 8 6 4 2 7.2 7.8 7.8 8.1 8.5 6.9 7.2 6.6 4.6 5. 25 26 27 28 29 21 211 212 213 214 F Scrap Imports [mton] 25 2 15 1 5 21.5 22.4 19.2 19.7 19.6 17.1 17.4 15.1 15.7 12.9 25 26 27 28 29 21 211 212 213 214 F Source : TSI 16/23
The largest and the only integrated flat steel producer of Turkey 5 group companies 12.8 employees 9,1 million tons of liquid steel capacity 17/23
Logistics & Market Power Appropriate commercial terms Container & barge delivery solutions Short lead time to neighbor markets Private port facilities Sustainable product quality Wide range of product JIT Just in time deliveries Customer oriented sales Product development ERDEMIR (4.2 km 2 ) Hot Rolling Capacity : 5.1 million tons Cold Rolling Capacity : 2. million tons ISDEMIR (6.8 km 2 ) Flat Steel Capacity Long Steel Capacity : 3.5 million tons : 2.5 million tons 18/23
Ports Efficient supply chain & logistic capabilities help to maintain a sustainable growth level ERDEMIR Port, largest deep sea port of Turkey in Black Sea SSC Eregli SLAB COIL HRC P&O CR HDG TIN PLATE SSC Efficient Supply Chain State of art facilitites located in a single area SSC Iskenderun SLAB COIL SSC HRC Only bulk Slab / HRC transfer between two plants BILLET WIRE ROD ISDEMIR Port, largest deep sea port of Turkey in Mediterranean Basin 19/23
continues to show sustainable production growth since 26 EU 27 Company 213 Production (Mt) ERDEMİR Crude Steel Production 8.3 8.5 Hot Rolling Capacity 8,6 mt 1 ArcelorMittal 96,1 2 ThyssenKrupp 15,9 3 ERDEMIR 8,3 4 Voestalpine 8 Crude Steel [mton] 5.4 CAGR 7% 7.1 6.5 6. 7.5 7.9 Plate Mill Capacity,3 mt Cold Rolling Capacity 2, mt 5 Riva Group 7,6 6 CELSA 7 HDG Capacity,3 mt is the only integrated flat steel producer in Turkey With its extensive product mix, from hot rolled coils to wire rods, the company is the market leader in Turkey ERDEMIR has 11,1 mtons of crude steel capacity & produces 25% of crude steel produced in Turkey Tinplate Capacity,3 mt Wire Rod Capacity,6 mt 2/23
Export Long Products Export 213 Long Products Export 214 6% 7% 1% 1% 6% 45% 46% 79% 7% Americas Asia CIS EU MENA Other 213: 275kton 214 F : 225 kton 21/23
Export Flat Products Export 214 Flat Products Export 213 1% 1% 1% 8% 5% 8% 1% 36% 9% 13% 9% 67% 32% EU Americas 213: 491 kton WORLD MENA TURKEY Asia Other MENA CIS Africa 214 F: 624 kton ERDEMIR 22/23
DISCLAIMER Ereğli Demir Çelik Fabrikaları T.A.Ş. (Erdemir) may, when necessary, make written or verbal announcements about forward-looking information, expectations, estimates, targets, assessments and opinions. Erdemir has made the necessary arrangements about the amounts and results of such information through its Disclosure Policy and has shared such policy with the public through the Erdemir website, in accordance with the Capital Markets Board regulations. As stated in related policy, information contained in forward-looking statements, whether verbal or written, should not include unrealistic assumptions or forecasts. It should be noted that, actual results could materially differ from estimates taking into account the fact that they are not based on historical facts but are driven from expectations, beliefs, plans, targets and other factors which are beyond the control of our Company. As a result, forward-looking statements should not be fully trusted or taken as granted. Forward-looking statements should be considered valid only considering the conditions prevailing at the time of the announcement. In cases where it is understood that forward-looking statements are no longer achievable, such matter will be announced to the public and the statements will be revised. However, the decision to make a revision is a result of a subjective evaluation. Therefore, it should be noted that, when a party is coming to a judgement based on estimates and forward-looking statements, our Company may not have made a revision at that particular time. Our Company makes no commitment to make regular revisions which would fully cover changes in every parameter. New factors may arise in the future which may not be possible to foresee at this moment in time. 23/23