Floweth the Cement

Floweth the Cement

MEGAPROJECTS

One of the largest scheduled projects in Turkey is the construction of Istanbul’s third airport. It will be built in the northern part of the city on the European side close to the Black Sea. The airport will cover 7,659 hectares and include six runways, 16 taxiways, 1.4 million sqm of indoor areas, 165 passenger bridges, four terminals, and 4.8 million sqm of parking space, as well as the usual buildings and facilities associated with an international airport. At the initial bidding stages in May 2013, 15 Turkish and two foreign companies participated. The Turkish joint venture of Cengiz-Kolin-Limak-Mapa-Kalyon won the tender with a bid of ‚¬26 billion including VAT submitted to the Privatization Authority. The first stages of construction are expected to begin in 2017.

In relation to airports, Turkey’s TAV Construction was named the “Best Airport Contractor of the Year” in April 2014 at the Emerging Markets Airport Awards. The contractor has undertaken $11 billion worth of projects in the region, including Hamad International Airport Passenger Terminal Complex in Qatar and the Abu Dhabi International Airport Misfield Terminal Building Project.

GLOBAL EYES

The domestic construction sector might be slowing, but construction companies are increasingly looking abroad. At year-end 2013, Turkish contractors had $31.3 billion worth of contracts overseas, a $5.2 billion increase on 2012. Improved international relations meant that companies had been able to secure 390 projects in 45 different locales, particularly in the Middle East, Africa, and Central Asia. Contractors were most active in Russia and Turkmenistan where many of the international projects were taking place. Over the past decade, the total cost of projects undertaken by Turkish companies abroad was $224.4 billion, when compared to taking on $50 billion of projects between 1971 and 2003; the staggering increase is clear to see. Of the top 250 construction companies globally, 38 are Turkish, which places Turkey second only to China in the world rankings. As more companies realize the potential of international contracts, especially SMEs, the construction sector figures are likely to increase and help boost the sector’s current $30 billion of annual exports by a predicted three-fold increase by 2023.

MATERIALS

The cement industry in 2012 stagnated nationwide as the construction sector began to slow. However, major government infrastructure projects planned for 2013 and beyond, such as the third Bosphorus bridge and its connecting highways and Istanbul’s third airport, will likely jump start the sector as massive amounts of cement will be demanded. Turkey’s total annual cement capacity currently stands at 106 million tons with the bulk of this coming from 20 international and domestic companies, according to the Cement Producers’ Association of Turkey. Roughly 20% of this capacity is exported; however, this number is expected to decline as more countries develop their own domestic cement industries. Despite this, Sabancı Holding, Turkey’s second largest industrial group after Koç Holding, is looking to increase its cement-production assets over the next five years. It hopes to almost double its current capacity from 13 million tons per annum to over 20 million. Sabancı Holding currently owns Heidelberg Cement, Akcansa Cimento, and Çimsa Çimento Sanayi & Ticaret. The group is in talks with various companies in Turkey as well as neighboring ones to achieve its goal.

Overall, 2013 marked an impressive achievement for Turkey’s steel and iron industry, as it managed to move up to become the world’s eighth largest producer of steel and iron. This is an increase of seven places compared to a decade before when it was the 15th largest producer in the world. Turkey also managed to increase it global market share from 1.76% to 2.34% over the same period. Total global production of steel stood at 1,607.2 million tons in 2013 with Turkey producing 34.7 million tons. Global production increased by 1% for the period, while Turkey far exceeded this number on 9% growth. Industry experts expect Turkey’s production to continue rising as it fills the gap of European producers, which have either stagnated their production or declined. By 2017, total production is expected to have reached 47 million tons on a 5.5% increase in compound annual growth rate (CAGR). International investment in Turkey’s steel industry is expected to increase further due to its having some of the lowest costs of production in Europe.

Another sector in which Turkey is a major player is ceramics. It is Europe’s third largest and the world’s sixth largest exporter of tile ceramics. The country accounts for 3.2% of world production and 11% of European production, with over 220 million sqm of ceramic tiles produced annually. Turkey exports 104 million sqm of tiles per year to 113 different countries, while the domestic market consumes 160 million sqm, making it the 11th largest market in the world. When it comes to sanitary ceramics, Turkey is also Europe’s largest producer, pumping out over 17 million units per year. It exports 8 million of these units to 95 different countries around the world.

If the construction sector in Turkey continues to decelerate, it will have to focus more on its exports and ability to attract foreign contracts to spur activity. However, with more infrastructure planned for the future, such as an audaciously planned canal running from the Marmara Sea to the Black Sea to ease shipping traffic on the Bosphorus Strait, it will not likely be too long before it shows signs of getting back on its feet.