The Turkish construction industry is rapidly rebuilding its order books following the global economic crisis in 2008. The construction sector’s contribution to GDP fell from TL6 billion in 2008 to just TL5 billion in 2009, reflecting the severity of the slowdown in the industry, though over 2010 the sector has managed to stage a rebound to TL5.9 billion, or 5.6% of GDP at producer prices. The positive sentiment in the industry remains. As Murat Akpınar from Ofton İnşaat sees it, “The construction industry didn’t shut down, it merely slowed temporarily. In 2010 we saw another boom, and we anticipate 2012 and 2013 being exceptional years also.”
While the construction industry is playing a major role in meeting the local market’s demands, it has been on the international stage that Turkish construction companies have begun to shine. With major projects across the CIS region, the Middle East, and Africa, the industry has managed to make up for slowdowns in one market by moving workers and resources to other parts of the globe. Garanti Koza is typical of the major construction companies working both in Turkey and overseas. “We are focusing on countries in the region, such as Azerbaijan, Iran, Iraq, Syria, and Saudi Arabia,” says Dr. Murat Binark, Garanti Koza’s General Manager. “Previously, our focus was on the Russian market, but it is saturated… One-third of the contracts that we take on are in foreign countries.”
According to Engineering News Record in 2010, Turkish contractors globally ranked second in size to those of China, indicating the important weight they now have in the international construction scene. Companies that cracked the top 100 list in terms of size included Enka, Ant Yapı, Tekfen, and Gama. Others in the main list included Ronesans, STFA, TAV, Polimeks, Yüksel, Nurol, Kayı, Onur, Cengiz, Yapı Merkezi, Baytur, Güriş, Doğuş, Yaşar Ozkan, GAP, Betatek, Çukurova, Yenigün, Rasen, Summa, Atlas, Makyol, Alarko, Metag, IC İbrahim Çeçen, Eser Taahhüt, Limak, TML, and Öztaş.
Many of these companies made their names by specializing in technical construction areas that can benefit other subsidiaries. A good example of this trend is TAV Holding, which has long been associated with airport
construction projects. However, the company does more than just provide the bricks and mortar, maintaining its control over the project through its airport management subsidiaries, while extending its activities to cover Latvia, Georgia, and Tunisia, as well as its Turkish airport holdings.
Alarko Holding has also shown how its general construction arm can benefit new opportunities in other business segments, with its focus on infrastructure and energy-related projects. Equally, the company has gained significant experience from its activities in providing transport infrastructure such as metro lines and tramways.
One of its major transport projects has been that of the Istanbul metro system, with the company involved in the Levent to Hacıosman extension, involving the construction of six stations, and the ongoing construction of the Taksim to Yenikapı extension. Other major public transport projects the company has been involved with locally include the mass transit systems in Samsun, Adana, Antalya, and in the capital, Ankara.
Tekfen Holding, long a byword for Turkish contractors abroad, has seen its previous focus on Turkey and Russia shift geographically to the Middle East, Central Asia, and North Africa, with the company finding itself increasingly involved with the construction of oil and gas related facilities. In Azerbaijan, Tekfen and its consortium partners have won a $163 million slice of a $355 million project for the construction of a new platform for BP Exploration in the West Chirag field. In Morocco, Tekfen has also been the lead contractor on the $640 million Samir Refinery upgrade program, showing the broad new avenues the Turkish construction industry has explored to stay competitive. Other countries where Tekfen has ongoing projects include Qatar, Kazakhstan, Saudi Arabia, the UAE, Libya, and Turkmenistan.
Although 2011 had been shaping up to be a good year for the construction industry, companies may find themselves having to pivot their resources once again following the outbreak of instability in the Middle East. Libya, especially, was a key focus area for many of the construction giants, with projects ranging from urban development and energy to public infrastructure now put on hold.
In 2010 Turkish construction companies had $1.5 billion worth of letters of guarantee issued for projects in Libya, while the overall size of the contracts outstanding was estimated at $15 billion, said Hüseyin Ersin Takla, chairperson of the Turkish-Libyan Business Council at the Foreign Economic Relations Board of Turkey (DEİK) in May 2011. However, Turkish construction companies have experienced instability before, and have a reputation for being able to bounce back and explore new markets.
CEMENT & CLINKER
The cement sector represents a major force in the country’s economy both in terms of domestic production and exports. The Turkish Cement Manufacturers’ Association (TCMB) estimated that in January 2011 Turkey had become the world’s fifth largest cement producer and fourth largest exporter, trailing only China, India, and the US, while also taking the crown as Europe’s biggest cement producer. In terms of installed capacity, Turkey had 105.5 million tons for cement and 63.9 million tons for clinker at the end of 2010, while the capacity utilization rate for TCMB members was 60% for cement facilities and 83% for clinker producers over the same period. On the domestic side, Turkey consumed some 47.7 million tons of cement and 3.3 million tons of clinker in 2010, up 19.34% and 83.88% in year-on-year terms, respectively.
In 2011, Turkey celebrated the 100th anniversary of modern cement making, seeing the initial 20,000 tons of production volume made in 1911 grow to some 66 million tons at the end of the centennial. Revenues for the sector reached some $4.5 billion over 2010, while exports were reported to be worth over $1 billion, according to TCMB Chairman Adnan İğnebekcili.
The cement and clinker market is a highly competitive one both domestically and internationally. Although Turkish manufacturers have an advantage in terms of raw materials and proximity to markets in need of cement and clinker products, high energy costs remain a significant pressure for all producers. The export market is also competitive and highly sensitive to swings in regional economic growth rates and political stability. Another key consideration for exports is that of transport costs, with producers located close to port facilities or with direct road access to export markets having a distinct advantage.
Turkey exported some 15 million tons of cement and 2.2 million tons of clinker over 2010, with the main cement export destinations by volume being Iraq, Syria, Egypt, Libya, and Italy. Markets in the Middle East have become the Turkish cement industry’s main targets since the global economic crisis, with reconstruction in Iraq proving particularly lucrative. Once the number one destination for cement exports, Russia fell from accepting over 3 million tons of Turkish cement in 2008 to just 468,000 tons by 2010, reflecting the economic slowdown seen there during the global economic crisis and the coming online of major new production facilities in Russia and fellow CIS members.
Cement companies are also well represented on the Istanbul Stock Exchange, with 21 being publicly traded on the bourse. Some of the main names include market leaders Akçansa Çimento (a joint venture between Germany’s Heidelberg Cement and Sabancı Holding) and OYAK Çimento Grubu, which controls producers such as Adana Çimento, Mardin Çimento, Bolu Çimento, Ünye Çimento, and Aslan Çimento. Other producers include Konya Çimento (majority owned by PARFICIM of France), locally owned BATIÇİM, and Lafarge-Ereğli Çimento.
Turkey’s construction industry is backed up by its strong building materials sector, estimated to account for 10% of the total value of the construction industry in the country, if the cement industry is included in the figure. The country is estimated to be able to produce 80% of its material needs, ranging from flat glass, through PVC pipes, wiring, tiling, marble, and ceramics. In terms of foreign trade, a few indicators demonstrate the growing importance of the building materials sector. According to the Undersecretariat of Foreign Trade, ceramics alone represented $787 million in exports, while the furniture sector was valued at $1.79 billion.
The Turkish Building Materials Producers Association (İMSAD) has been formed recently to coordinate the activities of the sector, especially those of exporters. İMSAD has set itself up as the main organizer for the annual MEGABUILD Eurasia Building Materials Exhibition, held in Istanbul and aimed at being the largest trade fair of its type for the region.
© The Business Year