TBY talks to Uğur Dalbeler, General Manager of Çolakoğlu Metalurji, on the local steel industry, market expectations, and export destinations.
TBY In the last few years you have been enhancing your product mix and investing in flat steel production. Can you tell us a bit about your products and where you are focusing your resources?
UĞUR DALBELER We have been in this business for over 50 years. Up until 2005 we only focused on long products: steel billets, reinforcing bars for construction, and wire rope. In 2005 we discussed what our future would look like in an increasingly volatile market. Those times were unpredictable, and things were difficult. In order to remain strong and competitive, we decided to widen our product mix. Turkey produces about three times more long products than the country needs, but on the other hand it can only produce 50% of its flat steel requirements. There was a big gap that was going to be filled eventually. Also, long products only serve the construction industry, while flat products are used by the entire manufacturing industry. Long products represent one-third of the total industry, while flat products serve the other two-thirds. In line with our new strategy, we became the first private company in Turkey to invest in flat steel production. Çolakoğlu has always been a pioneer of the industry. We were one of the first to install continuous casting machines, to build our own power stations, and to set the plants right outside ports for ease of access. We then wanted to be the first private entity to invest in flat steel. We studied various projects, made certain agreements, and finally started investments that were completed in June 2010. Today we are thinking about the next steps. The business is strong, we still cover the long products for construction, and we now cover hot-rolled products, which are a key raw material for the automotive industry, for household appliances, and for machinery.
What are your most important export markets and are there efforts to explore new ones?
In the past, 80% of our output went to China, and later a significant portion of our output went to Indonesia, Malaysia, and Thailand. Following economic instability in that region we were forced to diversify our export markets. I am proud at how much we have diversified. Our primary goal, however, is to maintain market share in places that are politically and economically stable. Egypt, for example, is an example to the contrary. In 2008 Turkish reinforcing bar exports to Egypt were zero. In 2009 exports were at 2.5 million tons, though in 2010 they fell to 500,000 tons. This is why the EU, the US, and Canada are important markets for us. We want to maintain a stable market share in these areas.
When you built your melt shop for flat production, you commissioned the world’s largest electric arc furnace. What advantage does this create for flat steel production?
Flat products—sheets, coils, plates—are usually manufactured by blast furnace mills, which use iron ore. On the long products side, the main portion is produced by electric arc furnaces, which use steel scrap as a raw material. Today we are continuing to use scrap products to create flat metals. This practice was first started in the US, and became very successful. Others in the world have followed the same path, such as Hyundai in South Korea and SABIC in Saudi Arabia. Our electric arc furnace is 300 tons in capacity and is the largest one operating in the world today, though there are more to come as others consider taking this step. There is talk about another Turkish company installing a 400-ton furnace. It seems the industry standard today is about 250 tons. Our first furnace in 1968 was only five tons.
What’s next for Çolakoğlu?
We may go downstream to do some more value-adding. We also aim to cover a bigger portion of the market by enriching the product quality and type. We produce hot-roll coil that is then further processed into cold-rolled coil and coated with either zinc or paint. Before steel is applied to a car body or a fridge, producers make such products thinner, stronger, and then add a protective coating before painting. We are interested in playing a larger role in this value-adding chain.
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