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In this interview with best-selling Hürriyet dated 10 October, 2004, Arcelor COE Guy Dolle is upbeat about the prospects for the Turkish iron and steel sector. Translated from Turkish by Tim Drayton.
Guy Dolle, CEO of world steel market leader Arcelor with a turnover of 25.9 billion dollars, said that they had gained valuable experience in Turkey with their joint ventures in Borçelik and Erdemir, and were interested to see how the government shares in Erdemir would be sold.
Dolle, pointing out that timing was of crucial importance in the privatisation process of the 3.81% and 46.12% stakes in Erdemir still held by the Turkish Development Bank and the Privatization Administration respectively, emphasised that the iron and steel sector was a very volatile sector. Guy Dolle, who had come to Istanbul for the International Iron and Steel Institute’s 38th annual conference, was interviewed by Hürriyet.
TURKEY AS A PRODUCTION BASE
Are you considering fresh investments in Turkey?
- We wish to increase our activities in Turkey. Because the rate of steel production in Turkey will rise more steeply. At the moment pro capita steel consumption in Turkey is 200 kilograms, compared to 400 kilograms in Europe. Should the opportunity arise, we want to further increase our investments in Turkey. Our customers in Turkey - Toyota, Renault, Arçelik, Tofas, Ford Otosan etc. - operate in both the domestic and export markets. Then, Turkey is a good centre for exporting steel to other countries. Located to the south east of Europe it forms a bridge to the Middle East and Asia. If we increase our steel production in Turkey we will be in a position to meet domestic demand as well as to export.
What is the most important factor influencing a global investor like yourself in its decision to invest in a country? How do you find the investment climate in Turkey?
- The most important factor for us is stability. Once you achieve this foreign investors will come. Political, monetary and economic stability are very important. The current climate in Turkey in this respect is much better than it was two or three years ago. Why is stability important? Because if we make an investment in the steel sector, construction work will last 30 months and it will also involve a very large amount of capital. This means that we may have to wait 15 years to collect the payback. In other words, we have to take a very long-term view of Turkey.
WE ARE WAITING FOR THE GOVERNMENT
Are you interested in Erdemir?
- We may take an interest in the privatisation of Erdemir. Erdemir is a very well-run company that has considerably raised its productivity over the past few years and it is a good partner of ours. Erdemir is a good company in a market with growth potential and may be of great interest to us. We are waiting to see what the government does with Erdemir, how privatisation will be conducted. Timing is crucial in this sector. The steel industry is a very volatile industry and has been in an uptrend for the last few years. For example, the price of steel has risen by 50% over the past five months. Obviously, this is the government’s decision and not ours. Arcelor has been growing for twenty years through privatisations and mergers. We also have experience with minority shareholders. We experienced a very positive example of privatisation in Spain. The state, private sector and shareholders all profited.
Everybody in the business world I speak to wants you to join the EU.
Arcelor CEO Guy Dolle said the following with reference to Turkey’s European Union journey, “Turkey’s EU accession process is proceeding on course. You should now be able to attract a great many more investors. Everybody in the business world I speak to wants you to join the EU. Because there are very important markets and opportunities.”
China has caused explosive growth in iron and steel, now it is India’s turn
To a large extent, China has reversed the fate of the world iron and steel sector. How much longer can the China factor last?
- China consumes 200 kilograms of steel per capita every year. This makes 260 million tonnes, equivalent to 26% of world steel production. For the past three years, Chinese consumption has risen by one million tonnes every ten days. Over the past three years, Chinese iron ore demand has increased from 50 million tonnes to 200 million tonnes this year. In fact, they have sufficient iron ore reserves to last them many years. However, they face a transportation problem. Their railway and port capacity is limited. And iron ore prices have risen. Several companies are finding it hard to get iron ore. Thanks to China, scrap prices have doubled and coke prices have quadrupled. Iron ore prices are up by 20%. Transportation costs have quadrupled. This year China will import 35 million tonnes and total consumption will amount to 260 million tonnes. India will henceforth be like China. Per capita steel consumption in India is 35 kilograms and economic development should raise consumption to 150-200 million tonnes.
Our joint ventures have strengthened our position in Turkey
How do you find the iron and steel sector in Turkey?
- The steel industry in Turkey is very strange. You export long products and import flat, rolled steel. As a country develops so does its demand for flat steel. Turkey currently imports a great deal of flat steel but within ten years will become a flat steel exporter. Over the past 15 years we have strengthened our ties with local partners. We have a joint venture with the Kocabıyık family in Borçelik. We set up Sollac packaging together with Erdemir.
Active in 60 countries with a payroll of 98,000
Arcelor became a giant with the merger in 2002 of Europe’s pedigree steel producers; Spain’s Aceralia, Luxembourg’s Arbed and France’s Usinor. Arcelor, which recorded sales of 25.9 million euro in its 2003 accounts, is active in 60 countries and employs 98,000 people. It produces 43 million tons of raw steel annually, making it the largest steel producer in the world. Arcelor is especially one of the most important steel suppliers for the automotive industry and is responsible for 4.5% of world steel production. Arcelor achieves 80% of its sales in EU countries but wishes to reduce its EU share to 50% in the coming years. Arcelor has been present in the Turkish market for the past 15 years.
Arcelor’s joint ventures and subsidiaries in Turkey