1 Kasım 2011 Salı

Raw material disputes harming steel business

Monday, October 31, 2011
ISTANBUL- Hürriyet Daily News

Steel rolling plants accuse Kardemir, the ingot steel supplier in Turkey’s north, of sparing the majority of the limited raw material for companies owned by its board members.

Kardemir, the manufacturer of nearly 400,000 tons of ingot steel annually, says the rolling plants in the region are trying to counteract the raw material prices. The rolling firms lack up-to-date technology, says the general manager of Kardemir. AA photo

A raw material dispute between one of Turkey’s main iron and steel manufacturers and local rolling plants is increasingly becoming a national issue as plants in the country’s steel capital close down one after another.

“Kardemir, which is one of the main suppliers of ingot steel, sells a majority of its production to three families who both have their own rolling plants and have seats on Kardemir’s board,” said Tayfun Çebi, the chairman of the Karabük Private Sector Rolling Plants’ Association (KAHDER). The northern province of Karabük is the center of Turkey’s steel production. “They are selling almost 80 percent of the ingot steel to those families without making a tender,” he told the Hürriyet Daily News yesterday in an interview.

Out of 25 rolling plants in Karabük, 18 have already closed down due to a lack of raw materials, he said, adding that importing ingot steel was not feasible for businesses in the province. He said Kardemir was essentially the sole actor in the sector.

Kardemir manufactures nearly 1 million tons of liquid steel, 600,000 tons of rebar and nearly 400 tons of ingot steel annually, he said, adding that nearly 320,000 tons of ingot were purchased by Kardemir executives. “Only the remaining 80,000 tons of ingot is shared by the rolling plants in the region, which is not enough.”

Çebi said KAHDER applied to the Capital Market Board of Turkey last week and officially complained about the supplier, Kardemir. “Nearly 1,700 people lost their jobs due to rolling plants closing down in Karabük,” Çebi added.

The association placed an announcement on the dispute in daily Hürriyet yesterday, calling on Kardemir to change its sales practices.

In the first quarter of the year, Kardemir posted a consolidated profit of $29.2 million, seven times more than the profit recorded in the same period last year. The rise is mainly due to higher sales prices.

Rolling plants colluding

However, Fadıl Demirel, general manager of Kardemir, denied the accusations. “All the rolling plants, in order to counteract the raw material prices, are acting collaboratively, which is against competition law,” Demirel said.

“The plants raising such claims could also import ingot steel from Russia and Ukraine,” he said, denying the claims on the involvement of the executives of the company into raw material purchases. “Anyone who has a stake in our company has the right to purchase raw materials from a 40 percent specially allocated portion of the production.”

The main reason for the plants closing day by day is their outdated technology and poor capital stocks, he said.

Turkish rolling plants in the region have entered into “some collusive agreements” in order to push Kardemir to mark down the prices, he said.

“How could we start a tender when iron and steel prices are experiencing great volatility?” Demirel asked in response to accusations.

Some people are disturbed with Kardemir’s economic performance and aimed to “weaken the public traded company’s prestige.”

The dispute between both Kardemir and the rolling plants in the region is greatly harming Turkey’s iron and steel sector, Pehlivan Baylan, the head of the Karabük Chamber of Commerce, told the Daily News yesterday. “The dispute needs to be resolved between the parties urgently as the continuation of tension leaves many people jobless and strikes the steel business.”

Monday, October 31, 2011

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