Turkey: Challenging Times – Part 3

Read part 2 here

Rise of nuclear power

Turkey’s energy problems are such that it has to rely on imports. It has to import about 90% of coal, 93% of its oil and nearly 97% of its natural gas. The country’s power plants generate 47% of the electricity using the natural gas it imports, mainly from Russia, while about 28% of the electricity is produced using the local coal combined with imported coal. Electricity is also imported from Bulgaria, Greece, the Czech Republic and Iran.

The Turkish government has begun the process of introducing nuclear power. In April of this year, according to World Nuclear News, Energy Minister Taner Yildiz and Russia’s Rosatom Director General Sergey Kirienko laid the foundation stone for the construction of the US$22 billion Russian-designed Akkuyu plant in Mersin on the Mediterranean coast. It will be the first of three nuclear power plants in the country’s plans to help boost the economy and reduce its dependence on fossil fuel imports. The plant is being financed by Russia to a build-own-operate model, under an intergovernmental agreement signed by Turkey and Russia in 2010. The plant is expected to be completed in 2020. During the launch ceremony Taner Yildez, emphasising the need for nuclear energy, said that nuclear power accounts for 11% of global electricity generation. It covers about 78% of power production in France, 19% in Russia and the USA, and 16% in Germany. The USA has 100 nuclear power reactors and is building another five while Russia has 34 reactors and is building nine more. China has 24 reactors and is building another 24, France has 58 reactors, and although Germany has shut down eight reactors it will continue to operate the remaining nine.

A week before the launch, President Recep Tayyip Erdogan approved his parliament’s ratification of an intergovernmental agreement with Japan to build the country’s second nuclear power plant at Sinop on Turkey’s Black Sea coast. Ownership of the 4800 MWe plant will be split between a consortium of Japan’s Mitsubishi and Itochu, and France’s Areva and GDF Suez.

In the same month Limak Holding announced that it planned to invest US$1 billion this year to boost power generation capacity to over 5000 MW over the next five years from the current 3000 MW.

Continued activity

Turkey has maintained its place as Europe’s top cement producer and number seven in the world. The Turkish Cement Manufacturers Association reported that in 2014 domestic cement sales were 62.5 million t while export sales were just under 8 million t. Earlier this year there were sharp falls in domestic cement sales and exports. Clinker exports were also well down on the same period in 2014. Ersagun Cabuk, however, writing for www.worldcement.com in April this year, was full of optimism about the future of the industry. He predicted that by 2023, cement production might well be close to 100 million tpy and consumption could be 79 million tpy. This prediction was based on the premise that there will be continued rise in urban renewal and increased infrastructure and construction activities. A recent Equity/Sector report by IS Investment is projecting that in 2015 and 2016 growth in cement sales volumes will be 4% and 5% respectively.

There is certainly plenty of activity in the industry. In May, Votorantim Cimentos announced a e140 million investment in the expansion of its cement plant in Sivas, which will see the plant’s capacity increased to 1.8 million tpy. This plant accounts for about 19% of the Brazilian group’s capacity in Turkey. After the expansion this will increase to 42%. The investment represents the largest undertaken by Votorantim outside the American continent. In March, the Sabanci Group’s cement unit’s CEO Hakan Gurdal predicted that sales in the Group’s cement business in 2015 would increase by 10 – 15%. The Group, which consists of the companies Akçansa and Cimsa, posted a 16% increase in sales in 2014 and is looking for acquisition opportunities at home and overseas. In June, Limak Cimento announced that it had signed an agreement with Sinoma International Engineering to build a 5000 tpd plant at Ankara. Completion is scheduled for the first quarter of 2017. Limak is looking to increase its market share in the domestic cement market from 12% to 20% through acquisitions and investments in a bid to boost production. In Africa it is investing US$50 million in the Ivory Coast and US$150 million in Mozambique on building cement plants.

Cimsa’s 51% subsidiary, Afyon Cement is currently building a 1.5 million tpy plant in the central Anatolia Region. The US$165 million investment is expected to become operational in 2016. Cimsa is now producing electricity from waste heat and gases in its Mersin plant and has increased the share of alternative fuel usage in the Eskisehir plant. The annual saving (based on 2014 figures) Is estimated to be US$2.6 – US$3 million. In January, Sancim Cimento was acquired by Askale Cimento. The acquisition follows the aborted acquisition last year by Cimsa. Sancim’s plant is located in Marmara where it is able to tap into the lucrative Marmara market.

The new 3500 tpd production line at Bolu Cimentos’s Kazan plant, which is being built by KHD, is scheduled to be commissioned this year. The commissioning of the Loesche raw meal mill at Vicat’s Bastas Baskent Cimento’s plant in Elmadag is underway, while the four Pfeiffer mills ordered by Balim Makina Insaat Sanayi for its plant at Elazig were due to be delivered earlier this year.

Medcem Global Pazarlama, which is responsible for the international investments of Eren Holding, is aiming to export 3 million tpy of cement and clinker from its Yesilovacik Port. It has investments in different regions of the world, one of which is in Cameroon where a new 0.6 million tpy cement plant is now entering service. As mentioned in our March issue, Cargotec recently supplied its third road mobile unloader for the Medcem at the Yesilovacik Port. For the same terminal, Aumund, which in 2014 supplied materials handling equipment for Votorantim at Yozgat, for the Limak Cement plant at Trakya and for Akçansa at Canakkale, delivered various conveyors for handling clinker and coal.

Border crisis

Turkey’s open border policy is coming more and more under strain, not only as a result of the thousands of refugees pouring into the country from Syria, but also from the threat of Islamic State attacks and illegal border crossings. The recent suicide bomb atrocity in Surac close to the Syrian town of Kobane, and cross border skirmishes have led the government to consider constructing portable concrete walls in some locations to add to the 10 km wall so far built. The new government, whether it is a coalition, or once again led by the AKP, may well have to decide whether to keep the border open or say ‘enough is enough’.

Sources

Company news, Reuters, Bloomberg, online press reports, The Telegraph, The Economist, BBC, Garanti Securities.

This is the final part of a three-part article written by Paul Maxwell-Cook for World Cement’s September issue and abridged for the website. Subscribers can read the full issue by signing in, and can also catch upon-the-go via our new app for Apple and Android. Non-subscribers can access a preview of the September 2015 issue here.

Read the article online at: https://www.worldcement.com/europe-cis/07092015/turkey-challenging-times-part-3-494/