THE BIG POUR

Turkey 2013 | REAL ESTATE & CONSTRUCTION | REVIEW: CONSTRUCTION

Turkey's powerful building materials market, along with some significant construction projects set out by the government, will help the sector maintain its strength.

Although the construction sector is not producing the double-digit growth figures it did a few years ago, it maintains its key role for the economy. Over 2012, the construction sector grew by 7% over the year, according to the Turkish Statistical Institute (TurkStat), representing 4% of national GDP. Construction permits issued also grew significantly by 37% overall in 2012, totaling 151 million sqm of property with 113 million sqm for housing and 38 million sqm for office, retail, hotels, and other. Over 20% of all permits were issued to projects in Istanbul. Over the past decade, the total area for construction permits has exceeded 1 billion sqm, which is a testament to the impressive growth the sector has experienced of late. The turn around in the sector took place in 2002, following the economic collapse of 2001. After restructuring, the banks turned their attention to retail customers instead of large public loans to the government, coupled with a campaign to increase awareness of mortgages, helped stimulate the economy. Both of these actions, along with the introduction of Housing Development Administration of Turkey (TOKİ), which uses public land as capital without spending from the budget, helped get the construction sector back on its feet and in turn the economy moving again.

A major project that the government is currentlyundertaking at the moment is to either renovate or rebuild any house that does not meet the new earthquake code. The project started in the middle of 2012 and there are an estimated 6.5 million homes that need to be addressed. It is likely to add some stability to the construction sector for the next decade, as there will be a steady flow of work, while also possibly affecting the wider economy as well.

MAJOR PROJECTS

Even though only 20% of the building permits are for Istanbul, the majority of large-scale projects for the near future are centered in or around the city, including a third international airport, the third Bosphorus bridge, and a canal connecting the Marmara Sea and the Black Sea,complementing the Bosphorus. The airport will be located to the north of Istanbul close to the Black Sea coast. A tender was won by Turkish joint venture consortia Cengiz-Kolin-Limak-Mapa-Kalyon on May 3, 2013 with a bid of €22.1 billion. The project will be split into four stages, with the first beginning in 2017, and is expected to take 42 months to complete. When finished the airport should have a capacity for 150 million passengers, six runways, 16 taxiways, 1.4 million sqm of indoor area, 165 aircraft passenger bridges, and four terminals with rail access between the buildings, as well as cargo areas.

Another project that began on May 29, 2013, is the third bridge across the Bosphorus. It will be called the Yavuz Sultan Selim Bridge and it will be situated between Sarıyer on the European side and Poyrazköy on the Asian side. The project is being run by a joint venture between Turkish company İçtaş and Astaldi from Italy. The bridge is expected to cost $2.5 billion in total and should be completed by the end of 2015. Once completed, it will boast being the widest suspension bridge in the world at 59 meters. A more ambitious project is the proposed Istanbul Canal. The plan is build a canal similar to that of the Panama or Suez Canal, allowing shipping traffic to by-pass the Bosphorus Strait. Work began in April 2013 in respect to the building of bridges for the various road networks and highways. The government has already set aside $10 billion for the project and the plan is for it to be finished for the centenary of the republic in 2023; however, there are concerns that the project may be too ambitious to finish in that timeframe. When completed, it will effectively turn the European side of Istanbul into an island, as it will be surrounded by water on all four sides.


INTERNATIONAL

The Turkish construction sector is a powerful market in the country and accounts for over 6% of GDP while employing 1.5 million people. The sector is also making a name for itself on the international stage, as up until now Turkish contractors have completed over 6,500 projects in 94 countries worth $206 billion. A large percentage of these projects were carried out in the CIS region, 44.1%, in the Middle East (24.5%), in Africa (19.7%), and in the EU (7.2%). Russia has seen the most projects of the highest value, with 1,372 project totaling $37.1 billion, followed by Libya with 525 projects at $26.3 billion, and then Turkmenistan with 722 projects at $23.6 billion.

Of all the projects undertaken, 13.3% were in housing and 11.4% in transport infrastructure. Turkish contractors have been created a steady flow of foreign currency into the country, and it looks set to continue as the EU and the US slowly begin to turn their economies around and start projects again.

BUILDING MATERIALS

Turkey is one of the leading producers of building materials, not just in the region but also in the world. In 2012, Turkey had an installed capacity to produce 108 million tons of cement and 66 million tons of clinker. It had a capacity utilization rate of 87% for clinker and 62% for cement. This meant that the country produced 66 million tons of cement and 57 million tons of clinker. Most of this was for domestic use, but the country also exported 9.7 million tons of cement in 2012, with Russia taking 1.9 million tons, Iraq 1.8 million tons, and Libya 1.4 million tons, with the rest split among other countries. It also exported 2.8 million tons of clinker, with Ghana, Brazil, and Benin taking the top three spots. Turkey only imported a very small amount of clinker in 2012 from Greece, totaling 38,069 tons. Turkey ranks fourth in the world for cement production behind China, India, and the US.

Turkey is also a leading producer when it comes to steel. In 2012, the country moved up to eighth in crude steel production from 10th in 2011. Steel production grew 5.2% on the year before to reach 35.89 million tons, which was also the highest growth seen by any of the top 10 steel producers in the world. Turkey's growth was 4.5 times higher than the world average of 1.2%. Turkey's steel production capacity also grew by 4.1% to reach 49.04 million tons, of which 100% are electric-arc furnace mills. Billet steel played a role in this growth as production rose by 10.9% to 27.05 million tons. In 2012, of the total amount of steel and iron that Turkey produces, it exports 20.3 million tons. This is an increase of 9.6% in terms of tonnage on the year before, but only a 3.3% rise in terms of value coming in at $17.2 billion. Billet exports reached 3 million tons, up 24% on the year before, but flat steel exports dropped by 19% to 1.86 million tons largely due to lower demand in the EU. While Turkey's steel imports increased by 10.8% in terms of tonnage to 11.84 million, it dropped in terms of value by 5% due to a fall in average price levels. Turkey's steel production export/import ratio grew from 141% in 2011 to 153% in 2012. Even though flat steel has taken a hit over the last year or so, successes in other steel products have been able to not just balance the export/import ratio, but improve it by 12 percentage points.

The ceramic industry is one of the fastest growing sectors of the building materials industry in Turkey. In 2011, the country produced over 260 million sqm of ceramic tiles, which meets all of domestic demand and leaves a significant portion for exports as well. There are 28 firms that actively carry out production with Eczacıbaşı, Kale, and Ege Seramik Groups being the leading producers in the country. Turkey exports its ceramics to 149 different countries, with the EU taking 44.8% of the share. The total value of ceramic exports in 2012 was $587 million. Glass production is also a significant sector for the Turkish accounting for $210 million in exports, again largely to the EU, which takes 40.18%.