Economy, Business And Markets

The Turkish Formula

Business & Markets Desk
The Turkish Formula
The Turkish Formula

The prospective lifting of western sanctions against the Islamic Republic in exchange for curbs on its nuclear program, in addition to Iran's vast potential for industrial investment, have drawn many trade delegations from around the world to test the waters and find lucrative areas of cooperation.

A delegation of Turkish steelmakers was the latest of the foreign missions to visit the country. Headed by the Chairman of Steel Exporters Association of Turkey Namik Ekinci, the Turkish steel giants came together in Tehran and met with their Iranian counterparts on Tuesday.

Turkey is the eighth largest steel exporter of the world.

Financial Tribune interviewed the Turkish official on the sidelines of the meeting on the Turkish firms' plans and offers.

The official referred to Iran's annual steel production target of 55 million tons as per its 20-Year Vision Plan (2005-25) and said Turkey can help Iran realize this objective.

Ekinci, who was updated on statistics about Iran's steel production and demand cited by and World Steel Association's Yearbook reports, said: "Considering Turkey's expertise and Iran's growing demand, we can cooperate in the production of crude steel, steel sheets, beams, wires and various steel sections, all of which are Turkey's areas of expertise."

Turkey's endeavors to become a world-class contender in the production of crude steel and steel products have granted it invaluable expertise in the field, he said, adding that Iran has recently opened up to global trade and intends to expand its industries by drawing on Turkey's experience in the steel sector.

According to Ekinci, Iran's steel industry should expand its target beyond the country's borders and shift to exports.

"If you want to enter the global market, the very first step is to understand the potential and weaknesses of every steel producing country," he said.

"Success is not only about producing the best product, but to know your competitor's winning cards as well as your own to know which areas to set your foot in and profit from."

> Steel Imports "Inevitable"

Referring to Iran's emphasis on importing the latest industrial technologies and curbing reliance on finished goods' imports, Ekinci described these as necessary and rational moves for developing the country's infrastructure.

However, he noted that Iran has a huge demand for steel, as 20 million tons of steel were consumed in the country in 2014, according to data from the World Steel Association.

"In the near future, this figure is forecast to reach up to 30 million tons as the construction industry gathers pace again. It would be a significantly tough call for Iran to produce this amount. Therefore, importing steel to meet its ever-growing domestic demand is inevitable," he said.

"It is simply impossible to produce every steel product domestically and meet the domestic demand in every section.

The Turkish official noted that there are limitations for every country ranging from lack of raw materials to imports being more economical than production.

"Many developed countries around the world import crude steel and steel products, despite massive production figures," he said.

Ekinci believes balance must be attained in production, exports and imports with strict adherence to free trade policies and that competition among different producers ensures the high quality of products at prices that can be constantly cut down through technological breakthroughs and reduced production costs.

Turkey strictly follows two guidelines: First, the quality of steel products exported and those distributed in the domestic market must be the same, and second the prices of exported and domestically consumed goods should also be around the same level.

"This assures us of consumer satisfaction both inside and outside our borders, and also curbs any overreliance on either exports or domestic demand. If everyone plays by these rules, there will be neither unmet demand nor any complaints about the quality of the products, giving rise to a healthy competition," he said.

> Privatization Key to Success

According to Ekinci, Turkey currently produces 35 million tons of steel per year, while annually importing close to 20 million tons and exporting about 17 million tons.

He emphasized that no state body interferes in Turkey's steel sector and free trade prevails. In fact, Turkey's main boom in its steel sector took shape when moves were made toward privatizing it.

"Our steel industry began as a state-owned sector in the 1930s. The private sector entered in mid-race, but its growth and overwhelming competition dwarfed the state-controlled firms. Realizing the potential of the private sector, the government put out its assets to tender and gave up the reins, which eventually led to Turkey's growth in the steel sector witnessed today," he said.

Asked about Iran's current capabilities to take the same path, the Turkish official said: "In my opinion, Iran is not yet ready for full privatization of the steel sector, as its infrastructure still requires support and development, and governmental control runs deep."

Ekinci, however, said if growth is to be pursued, full privatization of the sector must be on the agenda.

"The government can still earn through taxes, which will be considerably higher if growth is boosted," he concluded.