Regularly organized by TÜRKÇİMENTO, which represents the 94% of the cement industry, Anatolian Meetings this time held at Gaziantep City.
Gaziantep meeting took place with the attendance of TÜRKÇİMENTO Chairman Fatih Yücelik, Deputy Chairman Adil Sani Konukoğlu, and Vice Chairman Nihat Özdemir. Representatives of cement industry addressed the recent debates around cost/price, underlining that the price of cement sold in Turkey is the lowest in the world. Speakers warned that cement export restrictions currently being planned will more likely further reduce the already-low capacity utilization, pushing prices further up.
Evaluating the plans of halting export, Mr. Fatih Yücelik reminds that industry aims at export growth, explaining that “Industry has excess production capacity. Local demand is evident. Any export restriction will force mills give up some of production capacity. Mathematically speaking, this means increased costs. We are straining our every nerve to lower costs by achieving full capacity. If we are to be deprived of our export revenues, costs will most likely be reflected to the local prices. . Industry currently utilizes 60 – 70 percent of its overall capacity, meaning 30 – 40 % of idle capacity. What we only need is the sound projects, we will sufficiently support Turkey. We have mills everywhere, ready to produce.” Mr. Adil Sani Konukoğlu says “If you are to halt export, then you run under capacity, and cost per unit spikes up. Contractors want to establish mill, instead, they should come and acquire our mills. We are ready to transfer them as is, only in return of our investment costs.” Mr. Nihat Özdemir pointed out that any restriction to the export will upset the foreign capital, which will also create problems to the detriment of Turkish economy.
“Despite pandemic, we exercised great efforts to ensure continuity of construction industry.”
In his speech at Anatolian Meetings, Mr. Yücelik importantly underlined that Turkey has a total capacity of approx. 115 million ton, making her the largest producer in Europe, 5th largest in the World, and the 2nd largest exporter in the World, further noting that: “In the recent decade, our industry invested 2 billion USD in new mill establishment, doubling the production capacity up. In this period, construction industry has met its cement need entirely from local production. As of 2020-end, cement industry provides employment to 17,200 people on 76 mills, 55 of which are integrated mill. Our industry has a local market turnover of approx. 1.7 billion $, and export revenue of 1.1 billion $.”
Emphasizing that they exercised great efforts to contribute to the viability of the construction industry when COVID-19 pandemic crushed the production and economy, Mr. Fatih Yücelik noted that “Our industry unfortunately entered the pandemic period at its most vulnerable time as the local cement consumption had sharply decreased to 45 million ton in 2019 compared to 72 million ton in 2017. As cement industry, we had not stayed back from investments which will create added value for our county even when we had exposed to significant price pressures due to cost spikes, thanks to our perseverance and self-sacrifice we garnered for many years.”
Pointing out that import inputs and power costs account for about 80% of the total cost items in cement industry, Mr. Yücelik, Chairman of TÜRKÇİMENTO, provides the outlook: “Fuel requirement of our industry is significantly import-dependent. Cement industry meets over 90% of the primary fuel requirement from petroleum coke and import coal. Almost all of fossil fuels (92%) intensively used in the production is imported, i.e. indexed to the foreign exchange rates. Petroleum coke prices skyrocketed by 270% in August, 2021 compared to August of last year, while electricity and import coal prices soared up by 62% and 197%, respectively. Again, Local Lignite surged by 43% in July, 2021. And USD exchange rate went from TRY 7.27 in August 2020 to TRY 8.49. Despite all these adverse developments, industry showed its altruism by keeping the cement prices well below the rising costs. In this period, rise in the cement prices remained well below the rising costs. However, given these adverse conditions, our industry, unfortunately, is ill-gravely seen as a scapegoat behind the rising prices in the construction industry.”
“80% of the industrial production goes to local market”
Noting that TÜRKÇİMENTO member had succumbed to an overcapacity of 40 million ton at the end of 2020, Mr. Fatih Yücelik revealed the performance of industry in the first half of 2021: “In the first half of the year, cement production went up to 37 Million Ton increasing by 26% compared to last year, while local sales improved by 29% resulting in 28.3 million ton. 21.8% of the cement produced in the first half of the year was exported. Around 80% of the production was sold in the local market. According to interim data published by Exporters’ Associations, total export of cement industry in the January-August 2021 period increased by 12.3% on the basis of value, resulting in 836 million USD. However, total export volume has dropped by 2.9%, declining to 20.8 Million Ton, compared to same period of previous year.”
Mr. Yücelik underlined once more that the cement industry with an history of more than one century will continue to undertake the responsibility of being a leading actor in our shared future with devotion and against all odds, concluding that “at a time when sustainability issues have gained such significance all over the world, I think, it is much more important to focus our concentration, both as a country and industry, on this area.”
“In an 150 m2 flat, cement accounts for 7-9 thousand lira”
Mr. Adil Sani Konukoğlu, Deputy Chairman of TÜRKÇİMENTO reminds that Gaziantep city is always one of the top contributors to Turkish economy, explaining further that “Exporting to 180 countries, our city is the top 5th Exporter City of Turkey with an export of 9.5 Billion USD. Our target is to achieve 10 billion dollar by the end of this year. Anything we use today certainly has a mark of Gaziantep. In a time where world suffer from scarcity of mask fabric, Gaziantep industrialists produced mask fabric, ensuring Turkey to heave a sigh of relief. We aspire to achieve 10 billion dollar this year.”
Evaluating also the recent developments in cement industry, Mr. Adil Sani Konukoğlu elaborated that “Chinese cement priced at 70 USD, while ex-factory price is TRY 340 in Turkey. Today, 150 square meter flat consumes 70 cubic meter concrete, including foundation and garden. Average cubic meter price of concrete is TRY 300. Namely, it totals 21 thousand lira. Here, cement accounts for max. 33-35%. To sum up, for a flat sold by contractors for 1 Million TRY, cement cost accounts only for 7-9 thousand lira. Therefore, cost of the cement has a very limited share in the price of a flat is.”
“The cheapest cement in the world is in Turkey”
Mr. Nihat Özdemir, Vice Chairman of TÜRKÇİMENTO, called attention to the impossibility to separate cement and construction industry, evaluating further that: “If economy has to grow, it starts by the construction industry. Construction industry acts in concert with 200 industries. If economy comes to a halt, again, construction feels it first. And we are one of the sub-industries of the construction. We are manufacturing a product, heavy in weight but light in value. 2 years ago, we commissioned a study at Middle East Technical University that lasted for 6 months. As a result of this survey, cement only accounts for 3.5 percent of overall cost of residential construction. For luxury residences, this drops to 3%. Our company constructed the Yusufeli Dam, the highest in Turkey, the third highest in the world. It has a height of 275 meter. We poured 4.3 Million cubic meter concrete into this dam. We procured entire cement from Erzurum-based Aşkale Cement as it costs less due to transportation. Cement used in this dam makes up just 7.7 percent of total cost of dam. There are 55 mills in Turkey, unlike the claims, none of them sells at prices up to 500 lira. All cement mills in Turkey has an ex-factory price at around TRY 330-340. And if the product is to be transported 200 km away, then this transportation cost is added to the ex-factory price. This is not related to the cement producers. As Limak, we also have cement mills at abroad. We are both producer and consumer of the cement. Our sales price is TRY 1000 in Ivory Coast. USD 105 in Mozambique. 35 Dollar in Turkey. The cheapest cement in the world is in Turkey.
Asserting that in the recent discussions, there are statement which do not reflect the actual situation, and therefore ill-gravely misleading the public, Mr. Özdemir concludes that “We are ready to discuss the mathematics of the costs across any platform. Here, our request from media members is to question accuracy of the statements, abstaining from taking them as given.”
In his speech at the meeting, Economics/financial writer, Mr. Abdurrahman Yıldırım evaluated that “In the discussions around cement prices, the main culprit is foreign exchange rate. Specifically, USD exchange rate. In the recent 8 years, Turkish Lira devaluated by 77%. Average US Dollar Exchange Rate for 2013 and OVP USD Exchange Rate of TRY 8.30 for 2021. Turkish Lira devalued by 10% every year. This skyrockets the inflation. As a result of increased inflation, fueled by increased exchange rates, and other factors, we, as a country, lost our credit rating as investment grade. We have fallen 4 ranks down in the investment grade. It is hard to find someone who are willing to invest in a country which devalued by 77%. Unfortunately, Turkey cannot manufacture without import. When import raw materials used in the production, increase in exchange rate disperses through entire production. Problems are solvable if they are addressed with a holistic approach, and support to local production is expanded.
Journalist Mr. Vahap Munyar noted that government should take steps so as to clear the way for the economic dynamism in economy, notably of cement industry, concluding that: “With raw material and intermediates import, we also import inflation, which makes things further challenging for us.”
