While OYAK Mining Metallurgy Companies continues their activities that will brighten Turkey’s future in the second 100 years of our Republic with strategic investments,Erdemir and İsdemir focus on guiding the sector with their green transformation journey.
Valuable Stakeholders, Business Partners and Colleagues,
The Turkish economy demonstrated a strong growth performance in 2023 despite the global slowdown.
Many negative developments, such as the slowdown in the global economy, the weakening of the main export markets and the earthquake disaster, were among the factors affecting the Turkish economy in 2023. Despite these negativities, Gross Domestic Product (GDP) based on chained volume index (2009=100) increased by 4.5% in 2023 compared to the previous year.
In 2023, high levels of inflation were observed due to wage increases, exchange rate developments, increasing tax rates, food prices, rigidity in service inflation and strong domestic demand outlook. In addition, the increase in producer prices and developments in pricing behavior led to broad-based inflationary pressures. On an annual basis, CPI closed 2023 at 64.77%, in line with the Medium Term Program (MTP) target of 65%. Turkey has the potential to become a production center that can solve global supply chain problems by means of its policies to increase direct foreign investments, its entrepreneurial character, trained human resources and geopolitical location. It is estimated that these qualities will support growth in our country in 2024, especially as the delayed effects of the monetary tightening process will be more clearly observed.
There has been a gradual increase in the crude steel production of the Turkish steel industry as of the second half of 2023.
Crude steel production of the Turkish steel industry started to decrease in the second half of 2022 due to increasing energy input costs and diminishing demand. This decline deepened further with the earthquake disaster at the beginning of 2023.
There was a gradual increase in production towards the end of the year, as the facilities in the region, whose activities were interrupted due to the earthquake, started production again in the second half of 2023, the pressure created by energy costs decreased and approximately 6 million tons of capacity came into operation. However, since this increase could not fully cover the approximately 20% loss in the first half of the year, Turkey closed 2023 with a 4% decrease in crude steel production.
It is anticipated that there will be significant increases in Turkey’s steel production in 2024, with the support of new capacities that come into operation mainly in the second half of 2023. In the coming period, in addition to capacity increases, energy investments and input diversity investments for green transformation are expected to increase.
The increase in flat steel production in 2023 was limited to 1%.
After a record level of production in the Turkish flat steel industry in 2021, there was a 7% decrease in 2022. In 2023, a limited increase of 1% was recorded in flat steel production. Flat product imports were 9.5 million tons and exports were 3.5 million tons as of the year-end.
In 2023, flat steel consumption reached a record level of 19.5 million tons, increasing by 13% compared to last year. The impact of the construction and infrastructure activities that were supported after the earthquake disaster at the beginning of 2023 was high in this increase.
The current consumption trend is expected to continue in 2024. It is estimated that the moderate recovery in manufacturing industry production, especially towards the second half of 2024, and construction activities resulting from post-earthquake reconstruction and urban transformation will have a supportive effect on steel consumption.
We lead the sector as a global steel power.
Approaching their 60th anniversary of establishment, OYAK Mining Metallurgy Companies continued to add value to their stakeholders and become Turkey’s global steel power in 2023 with their sustainable growth, responsible production and people-centered approach.
As OYAK Mining Metallurgy, we are one of Turkey’s largest economic actors providing direct employment. With our 12 thousand 487 employees, we have a strong and widespread influence in the regions where we operate. Within this area of influence, we create indirect employment for approximately 300 thousand people. In this way, we support regional progress of the geographies in which we operate and contribute to the socioeconomic development of local communities
While we lead Turkey’s steel production with the strength we derive from our stakeholders and business partners, we not only direct our industry but also compete with the world’s eminent steel producers on a global scale thanks to our deep-rooted business culture, operational agility and superior financial performance.
In 2023, our final product production was 7.4 million tons in total, consisting of 6.7 million tons of flat products and 652 thousand tons of long products. The total exports of our companies as of the end of the year was 802 thousand tons. Within the scope of our foreign sales, which constitute 11% of our total sales, we exported flat products to 33 countries and long products to 9 countries.
Although our OYAK Mining Metallurgy Companies suspended their production activities due to the impact of the earthquake, they managed to reach an EBITDA value of USD 643 million in 2023 and complete the year with a net profit of USD 170 million, thanks to their effective operation capabilities.
We celebrated the 100th anniversary of our Republic with investments.
During this period in which we focus on high valueadded production by increasing our domestic production capability, we are working to consolidate Turkey’s identity as a strong player in the region.
The environmentally friendly and technological new Blast Furnace, built by Erdemir -one of the sources of proud for our country- to replace the old furnace with the efforts of Turkish engineers, was put into operation on October 29, Republic Day. We are presenting our new 2nd Blast Furnace, “Zübeyde”, named after Gazi Mustafa Kemal Atatürk’s mother, to the Turkish industry.
Erdemir has played a significant role in the development of our country’s industry since the first day it was put into operation and has always focused on value-added production. The Company’s this new investment will contribute to the goal of reducing foreign dependency in the iron and steel sector, which is critical for the country’s industry. Being among the top 5 among the 500 largest industrial enterprises in our country, Erdemir provides raw materials to countless sectors and gives confidence for the future with sustainable growth steps while continuing to produce for the future of Karadeniz Ereğli and Turkey.
Erdemir and İsdemir, which are among the most valuable industrial assets of our country, have successfully created their green transformation road map. By shaping the steps of this transformation, Erdemir and İsdemir aim to reduce carbon emissions per ton of crude steel by 25% by 2030, 40% by 2040, compared to 2022, which they determined as the base year, and to reach net zero emissions in 2050.
Erdemir carries on its investments to increase energy efficiency, production capacity and performance. The Company commissioned its sixth steam boiler, which allows by-product gases such as blast furnace, steel mill and coke gas to be effectively brought into production and contributes to additional steam and electricity production. In addition, efforts are being carried out to commission the fourth coke battery with an annual capacity of 800 thousand tons in 2024, to replace Erdemir’s first and second batteries, which have been in continuous service since its establishment.
We carry out every stage of OYAK Mining Metallurgy Companies’ ongoing major investments in the field together with Erdemir Mühendislik, from project design to commissioning. We have extensive engineering experience in facility investments as well as in steel production.
İsdemir, which had to suspend production due to the earthquake, restarted its production facilities in a short time and started its operations at full capacity. We are still deeply saddened by the loss of 24 colleagues in İskenderun in the Kahramanmaraş-centered earthquakes that shook the whole of Turkey deeply. Drawing strength from our solidarity and unity, we strive to heal our wounds together and work for a stronger future. In this direction, while we continue our investment and modernization activities at İsdemir, we also carry on our work on the 1st Blast Furnace Project. We aim savings in the amount of electricity purchased by directing the additional blast furnace gas, which will result from the increases in the amount of final product and liquid crude iron production due to the expansion of the furnace volume, to electricity production.
There are hard coal and quartz sand mines in the Alacaağzı Coal Mine, located in the Karadeniz Ereğli district of Zonguldak, which Erdemir Maden acquired in 2019. Following the completion of surveys, projects and feasibility studies for the hard coal reserves in the license area, preparations for production continue. Within the scope of the project, coal production is planned to start in 2024.
At Erdemir Maden, infrastructure work is continuing to establish a pelletizing facility in the iron mine site located in Bingöl-Avnik, with an investment of approximately USD 550 million.
Our 2050 target is “Net Zero Carbon”.
In the age of change and transformation we live in, we act with sustainable growth, responsible production and people oriented approach. We focus on producing sustainable value in every field with our exemplary successes and continue our activities with a sense of responsibility towards the economy, the environment and society. We are increasing our investments in sustainable production by adhering to our environmental and green transformation principles.
With the announcement of carbon emission reduction targets in many countries, industries around the world are determining appropriate roadmaps. While companies investing in the future take action for the necessary regulations by committing to net zero emission goals, these steps taken for a greener and sustainable world also enable companies to maintain their competitiveness in global markets.
As the leading producers of the sector in Turkey, which is the second largest steel producer in Europe and the eighth largest in the world, Erdemir and İsdemir will continue to play an active role in the steel industry with their compliance studies to green transformation.
As Erdemir and İsdemir, having high economic value for our country and region, we have created our road map by showing determination to take steps for fulfilling our responsibilities in green transformation. We have planned the critical steps to complete this transformation in our companies, and the processes on how to activate these steps, in order to meet the expectations of our customers, investors and other stakeholders.
Within the scope of our short-term goal of reducing our carbon emissions per crude steel produced by at least 25%, we will realize a transformation investmentof USD 3.2 billion in Erdemir and İsdemir by the end of 2030. These projects also include the installation of solar power plants with an annual electricity production capacity of 1 million 710 thousand MWh. We plan to use mainly sustainability-linked foreign financing sources for projects and to benefit from domestic incentives.
The plan and net zero emission target determined by our companies for green transformation will be a role model for our country’s iron and steel industry and will direct the future of the sector. This transformation in the production of steel, which covers a significant place in almost every aspect of life such as buildings, automobiles, white goods and electronic equipment, will be the pioneer of the journey of all sectors in this area. The crude steel capacity of Erdemir and İsdemir will reach 13 million tons by 2030. Erdemir and İsdemir, which have been working and investing in green transformation since 2016, will continue to guide the sector with the steps they will take.
As OYAK Mining Metallurgy Companies, we identify the sources that cause an increase in our greenhouse gas emissions through our analyzes and we take actions to improve them. In this context, we have carried out preliminary studies in our companies for emission reduction through activities such as energy efficiency, increasing the use of scrap in production and the use of HBI (hot briquetted iron).
In addition, we followed the development of lowemission steel production technologies and shaped our net zero roadmap with feasibility studies. In our green transformation journey, which we started with the aim of reaching net zero emissions in 2050, we will take firm steps towards a sustainable future with our improvement and investment activities that will reduce carbon emissions and provide energy efficiency.
As we leave behind the 100th anniversary of our Republic with great pride, we will achieve great success by working determinedly to move our country and our Company even further. OYAK Mining Metallurgy Companies, one of our country’s most valuable industrial assets, will continue toproduce for Turkey’s future in the second 100 years of our Republic.
Respectfully,
Süleyman Savaş ERDEM
Chairman
of the Board of Directors