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Bridging the Gaps in Turkey

World Cement,

Turkey and the EU

The finishing line for Turkey’s entry into the European Union is still not in sight, even though it applied for entry in 1987. By way of a useful consolation, the country joined the EU Customs Union in 1996, and trade with the EU now accounts for half of the country’s foreign trade. There are a number of outstanding issues still to be resolved between the EU and Turkey. As with the other countries that were admitted into the EU within recent  years, Turkey has to not only enact a wide range of economic and political reforms, but it also has to address the rights of the Kurdish minority, relations with Armenia and the ongoing dispute over Cyprus. That said, RSM International confirms that Turkey has one of Europe’s fastest growing economies with a dynamic, youthful population that will cushion the looming demographic crisis of an ageing European continent.

Economic problems

The global downturn has severely hit Turkey’s economy where it contracted by about 5% in 2009, and is only projected to grow by about 2% this year. The country’s industrial output fell by 20% in 2009 compared with the previous year. Its textile manufacturers and chemical producers came to a halt in 2009 as demand from the EU fell away. Consumer electronic sales dropped by 55%, while iron and steel production declined by 24%. Of all the sectors that make up Turkey’s GDP, the construction sector was the worst hit, registering a 19.5% decline in added value in real terms in the first nine months of 2009. The construction industry, reported to be the third largest in the world, is labouring under the housing slump.

The infrastructure sector was likewise subdued in 2009, with major projects and privatisation arrangements put on hold. However, BMI is optimistic about infrastructure during 2010, and suggests that though energy and utilities will contribute the lion’s share to total infrastructure industry value, transport infrastructure will see a steep rise, perhaps registering annual average real growth of 28.3% between 2010 and 2014, while energy and utilities infrastructure industry value will register average annual real growth of 5.9% over the same period. Major projects to look out for are: the ongoing construction of high speed railways; investments in ports from new operators; the Izmit Bay Bridge and motorway; the Bosphorous tunnel, and renewable energy (hydro and geothermal) projects.

Leading with cement exports

In 2009 total clinker and cement capacities exceeded 62 million and 103 million t respectively through new additions in recent times. Capacity utilisation rates were 58.64% for cement and 84.82% for clinker, respectively. Domestic sales of cement began to slow during the second quarter of 2009 as a result of the global economic crisis, and then continued decreasing through the rest of the year. At year end, domestic cement consumption remained at 42.8 million t, i.e. at the same level as in 2008. As investments decreased in the global markets, competition became tougher, but the Turkish cement industry had the ability to reduce the negative effects by increasing its cement and clinker exports.

At the beginning of April, Adnan Ignebekçili, Chairman of the Turkish Cement Manufacturers’ Association, speaking at a dinner for the press, confirmed that in the global competitive environment, the Turkish cement industry had become Europe’s largest manufacturer and exporter of cement and clinker. Ignebekçili also confirmed that fuel and electricity costs correspond to 60% of the production costs in a cement plant and that the widespread use of alternative fuels must be accelerated.

The Chairman was looking to 2010 as the year of recovery. Investments within the last five years have resulted in clinker production rising 56% from 40.3 million t to 63 million t. If all this production capacity is used, some 75 million t of cement would be manufactured and, in order to utilise all of this, the domestic market would have to grow by 75%, and that excludes exports.

Adnan Ignebekçili concluded, “in my opinion we shouldn’t expect a high recovery as has previously occurred. With the deepening global crisis in the EU countries, the problems in the economics of the Euro region bring new dimensions to the crisis. This development could introduce added risks in our national economy. Therefore, I believe that we have to retain our position regarding short and middle term forecasts. On this account we should consider 2010 as a year of recovery, and providing there are no new shocks during the current crisis, people can expect a stable growth in 2011.”

The full version of this article can be found in the June issue of WORLD CEMENT – available for subscribers to download now. For more from Paul Maxwell-Cook, subscribers can read his monthly Regional Insight here.

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