Turkey's steel market began 2025 with strong performance levels, reflecting the high rates achieved in the previous year. However, significant challenges remain, with several factors threatening the future of the local steel industry. While there are indications that growth is still possible, questions are emerging regarding the overall stability of the market.
State Support for Steel Industry Under Debate
The Turkish Association of Steel Exporters (CIB) continues to push for increased state support, pointing to examples from the United States, China, and the European Union. However, the Turkish government has so far focused only on limited measures aimed at protecting the market from steel product imports. This situation places significant pressure on local steel producers, who must navigate the current regulatory landscape.
A Mixed Outlook for Steel Production
The record year for Turkish steelmakers was 2021, when production hit an all-time high. While a decline followed, the industry began to show positive growth again in 2024. Steel exports followed a similar pattern, with imports seeing a marked increase despite the sharp devaluation of the Turkish lira by 60%.
The monetary policy of the Turkish Central Bank has had a dual impact on the steel sector. On one hand, production costs in dollar terms dropped, giving exporters an advantage. On the other hand, costs for essential raw materials like ore, scrap, and coking coal rose, as these materials are largely imported.
Despite these challenges, imports of steel products surged in January 2025, up 24.9% year-on-year. This was largely driven by an increase in flat product supplies, while long product imports remained largely stable. This growth, however, raises concerns about the future competitiveness of Turkish steelmakers, with many opting to buy slabs instead of increasing domestic production.
Critical Weaknesses in the Automotive Sector
The Turkish car market has faced significant fluctuations over recent years, and 2024 was no different. The car market showed minimal growth, with a slight increase of 0.8% in sales. However, car production dropped by 5.1%, and commercial vehicle production declined by 10.7%. Despite the challenges, the Turkish car industry maintained its leadership in export sales, with a 17.3% share of total exports.
Unfortunately, the start of 2025 has been disappointing. In January and February, car sales dropped by 15%, with passenger car sales falling by 10%. The industry remains optimistic, however, with hopes that car sales will stabilize at around 1.2 million units by the end of the year, assuming favorable exchange rates and stable taxes.
However, the prospects for Turkish auto exports to the European Union remain uncertain. European carmakers are facing their own challenges, including weaker demand and internal competition. Additionally, a recent decision by the European Commission to delay new auto emissions requirements until 2028 could put Turkish exporters at a disadvantage, especially as local European manufacturers benefit from reduced production costs due to a weakening of the euro.
Construction Sector: A Potential Growth Area
The Turkish construction industry, a significant consumer of long steel products, has experienced a downturn in recent years. Foreign interest in purchasing new homes in Turkey has decreased dramatically, particularly in 2024 when foreign housing sales plummeted by 32%. However, domestic sales of mortgage-financed homes saw a significant increase in January 2025, offering hope for a rebound in the market.
State Housing Projects and Infrastructure Plans also hold potential for growth in the construction sector. A significant number of homes are set to be built for victims of the February 2023 earthquake, and ambitious infrastructure projects, including a high-speed railroad and energy sector developments, could provide a boost to steel demand.
Economic Outlook and Risks for 2025
Despite the challenges, Turkey's GDP is expected to grow by 3% in 2025, which is a positive signal for steel-consuming industries. However, potential risks include escalating global trade tensions and geopolitical issues within the country. The Turkish business community anticipates further easing of monetary policies, which could provide relief to the steel industry as it faces ongoing challenges in a volatile market.
