Turkey’s cement industry: Onwards and upwards

The Republic of Turkey, which is divided into 81 provinces that are grouped in seven regions, spans 783,562km² in western Asia and southeast Europe. Turkey's estimated 2014 population of 82 million is ruled by a president and a prime minister in a democratic constitutional republic. The EU-Turkey Customs Union has led to extensive liberalisation of tariff rates, making Turkey a major trader with European countries like Germany and the UK. Turkey also started full EU membership negotiations with the European Union (EU) in 2005. Turkey's cement industry is one of the largest in the world. Here, Global Cement provides an industry overview, including Turkey's top producers, recent cement sector events and its outlook.

Economy

Turkey, which has an emerging market economy as defined by the International Monetary Fund (IMF), had a GDP (purchasing power parity - PPP) that rose by 4% year-on-year to US$1.167tn in 2013, up from US$1.124tn in 2012 (Figure 1).¹ Its GDP/capita grew to US$15,300 from US$15,000 in 2012. GDP was contributed to by the service sector (63.8%), industry (27.3%) and agriculture (8.9%). Industrial production grew by 3.8% in 2013. Inflation (consumer prices index - CPI) fell to 7.6% in 2013 from 8.9% in 2012.

Turkey's labour force was 27.1 million in 2013, although some 1.2 million of those workers were employed abroad. Unemployment rose to 9.3% from 9.2% in 2012, while youth unemployment (aged 15 - 24) rosto 17.5%. The population grew by 1.12% to an estimated 81,619,392 in 2014, 16.9% of which lived below the poverty line.

Turkey is a net importer of goods. During 2013, some US$243bn of goods, mainly machinery, chemicals, fuels and equipment was imported, while US$168bn of goods that primarily comprised textiles, foods and garments were exported. Although Turkey has a strong industry and production base, it relies on imported oil and gas for 97% of its energy needs.¹ Several gas pipelines projects to transport central Asian gas to Europe through Turkey are ongoing, which should ultimately increase supply confidence.

Cement industry

Turkey has 50 active integrated cement plants and 84.6Mt/yr of production capacity (Figure 2), according to the Global Cement Directory 2015 and Global Cement research. A further three integrated plants are under construction, one grinding plant is having its first clinker line installed to become an integrated cement plant and another plant is being relocated in Afyon. Turkey also has 17 active grinding plants (excluding the soon-to-be integrated cement plant) and >8.56Mt/yr of grinding capacity. The production capacities of some of the grinding plants is unavailable. The Turkish Cement Manufacturers' Association (TCMA) claims that Turkey has significantly higher cement and clinker production capacities than Global Cement can verify (Table 1).²

The TCMA reported that in the first 11 months of 2014, cement production fell by 2.41% year-on-year to 65.2Mt, while clinker production grew by 2.92% to 56.5Mt.² Given that 4.56Mt of cement was produced in December 2013, Turkey's cement production for the entirety of 2014 is unlikely to have exceeded 70Mt. This is significantly less than the United States Geological Survey's (USGS) estimated 75Mt of cement production in 2014.³ Turkey lost out on being the fourth-largest cement producer in 2014 and now shares that position with Iran, which, according to the USGS, also produced 75Mt of cement in 2014. Turkey and Iran follow China (2.5Bnt), India (280Mt) and the US (83.3Mt). Brazil, which produced 72Mt of cement in 2014, is closing in on Turkey's production.

In the entirety of 2013, the latest year that full data is available, the capacity utilisation rate of the TCMA's member companies was 69% for cement and 92% for clinker (Table 1). Cement capacity utilisation was lowest in East Anatolia (57%) and highest in Marmara (75%). Clinker capacity utilisation was lowest in Central Anatolia (85%) and highest in Marmara (99%). Cement is primarily produced in the west of the country, with capacities of >15Mt/yr in the Marmara and Mediterranean regions (Figure 2). In the first 11 months of 2014, the TCMA reported that cement production grew by 3.17% in the Black Sea region, but fell in all other regions. Clinker production fell by 1.21% in Marmara, by 1.44% in Central Anatolia, by 0.77% in East Anatolia and by 0.04% in Southeast Anatolia. Clinker production rose in the remaining regions.

Domestic cement sales were 60.9Mt in 2013. They were highest in Marmara at 14.1Mt and lowest in Aegean at 5.19Mt. CEM II was the most-common type of cement bought by the domestic market in 2013, when sales volumes hit 20.1Mt (Table 2). Some 5.92Mt of CEM IV and 1.2Mt of CEM III was sold to domestic buyers. In contrast, CEM I was the most popular type of cement for export; in 2013, some 4.74Mt was sold. CEM II, of which 3.99Mt was sold, also proved popular. Turkey is also one of the world's most significant producers of white cement. It is produced by Çimsa Çimento in Mersin (1.10Mt/yr) and by Adana Çimento (Oyak Group) in Adana (0.35Mt/yr). Both plants are in the Mediterranean region.

Readymix concrete producers are Turkish cement producers' largest single customer type. In 2013, they bought 32.3Mt of cement, some 52.9% of the country's production. Distributors are Turkey's second-largest cement buyer. They bought 20.5Mt of cement in 2013, 33.7% of the country's total. Contractors bought 2.94Mt (4.83%), construction firms bought 2.41Mt (3.95%) and precast concrete producers bought 1.97Mt (3.24%). In contrast with typical developing countries, Turkey's domestic cement sales were primarily in bulk as opposed to bagged.

Cement exports fell by 4.08% year-on-year to 9.63Mt in 2013. The majority of exports was from the Mediterranean (4.87Mt, 50.6%), Marmara (1.88Mt, 19.5%) and Southeast Anatolia (1.33Mt, 13.8%) regions. Cement was exported to 86 countries, primarily to Libya (2.89Mt), Iraq (1.62Mt), Russia (1.08Mt), Israel (631,256t) and Syria (566,140t). Clinker exports fell by 22.2% year-on-year to 2.18Mt in 2013. Clinker was exported to 27 countries, mainly Israel (207,363t), Brazil (199,110t), Togo (173,200t), Ghana (170,145t) and Romania (167,250t).

Exports were dispatched by sling (3.29Mt, 34.2%), by bag (2.75Mt, 28.5%), in bulk (2.46Mt, 25.6%) and by bigbag (1.13Mt, 11.7%). In contrast to domestic sales, there was a large regional variation in export methods. Central and East Anatolia both used bags for 100% of their exports, while Marmara used 0% of bags and Aegean exported 0.2% of its cement by bag. Aegean was the only region to export primarily by bulk (61.6%), while Marmara used a combination of bulk, sling and bigbag. The Mediterranean region, which exports the largest quantity of cement, used mainly sling (42.3%) and bag (35.7%).

Figure 1 - Table: Cement production (Mt) in Turkey in 2000 - 2014. Sources: The World Databank and the Turkish Cement Manufacturers' Association (TCMA).

Table 1: Cement and clinker production volumes in Turkey in January - November 2014. All other statistics of the Turkish cement industry relate to 2013. Source: The Turkish Cement Manufacturers’ Association (TCMA).

Table 2: Turkey's domestic and export sales by cement type in 2013. Source: The Turkish Cement Manufacturers' Association (TCMA). SRC = Sulphate-resistant cement.

Above - Figure 2: The integrated cement plants in Turkey in 2015, colour-coded by installed integrated cement production capacity in each Turkish region. Source: The Global Cement Directory 2015 and Global Cement research. (click to open PDF with cement plant listings)

Cement producers

The majority of cement producers in Turkey are Turkish companies. Akçansa Çimento, Oyak Group, Çimsa Çimento, Limak Batı Çimento, Aşkale Çimento and Limak Çimento are the country's major Turkish cement producers. There are also many companies that have one or two cement plants each. Multinational producers like Votorantim Çimento, Lafarge, Cementir Holding and Vicat are also active in Turkey's cement market.

Oyak Group is Turkey's largest cement producer by installed integrated cement production capacity (Table 3). In 2015 it has 15.3Mt/yr of production capacity from six plants. It also has two active grinding plants. A third grinding plant run by its Bolu Çimento subsidiary in Caydurt, Bolu is having a clinker line installed to convert it to an integrated plant. Oyak's net sales grew by 14% year-on-year to US$552m in 2014.⁴ Its operational income grew by 31% to US$172m, while earnings before interest, taxes, depreciation and amortisation (EBITDA) rose by 26% to US$199m. Net profit grew by 69% year-on-year to US$163m. Mardin Çimento in Southeast Anatolia was the only one of Oyak's subsidiaries to have a poor year. Its net sales were flat, while operating income and EBITDA were both down. However, the plant managed to increase its net profit by 15% year-on-year by 'utilising the struggling Middle Eastern markets.' During 2014, Oyak's Bolu Çimento started to produce and sell slag cements, which according to Oyak, helped it to increase its sales in the 'very fragmented and highly competitive Mediterranean market.'

Akçansa Çimento, which has five integrated cement plants and 8.63Mt/yr of cement production capacity, is Turkey's second-largest cement producer. It also has one grinding plant in Iskenderun with 10 lines. Established in 1996, Akçansa is a joint venture between Sabancı Holding (39.7%) and HeidelbergCement (39.7%). The remaining 20.6% of shares are owned by public shareholders. In 2014 Akçansa's cement division reported US$401m of sales, up by 19% year-on-year, an operating income of US$125m, up by 58% year-on-year and an operational profit of US$121m, up by 59% on 2013. As for Turkey's other large producers, Akçansa has made significant recent investments in alternative fuels. Its thermal substitution rate was 6.67% in 2013, when it had alternative fuels firing capabilities at its Büyükçekmece, Çanakkale
and Ladik plants.

Çimsa Çimento is the third-largest cement producer in Turkey. It has four active integrated cement plants that have 7.57Mt/yr of production capacity; its fifth integrated plant, Afyon Çimento, is currently being upgraded from 0.55Mt/yr of cement production capacity and relocated between two villages in Halimoru. Çimsa also has one 530,000t/yr capacity grinding plant in Ankara. Çimsa produces white cement and calcium aluminate cement as well as CEM I, CEM II, CEM III and CEM IV. In the first quarter of 2014, which ended on 31 March 2014, Çimsa produced 1.26Mt of cement, including 218,375t of white cement, 8421t of ISIDAÇ-40 (a calcium aluminate cement) and 1081t of sulphate-resistant (SRC) cement. In the entirety of 2014, Çimsa reported US$1.094bn of sales and an operating profit of US$93.6m.

Nuh Çimento is the fourth-largest producer in Turkey, with just one integrated cement plant that has 5.7Mt/yr of production capacity. The company launched cement production in 1969 and has continually updated and expanded the plant in the years since. Most recently, in 2012, it commissioned a refuse-derived fuel (RDF) feeding system and an 18MW waste heat recovery (WHR) system. The capacity of its sea water desalination plant was also increased to 600m³/hr. In addition to CEM I, CEM II and CEM IV, Nuh Çimento also produces oil well cement Class G type HSR (high sulphate-resistant).

Limak Batı Çimento is Turkey's fifth-largest cement producer. It was established in 1976 and now has five cement plants and 5.41Mt/yr of integrated cement production capacity. Limak Batı Çimento also has one 1.3Mt/yr grinding plant in Istanbul.

Table 3: Turkey's largest cement producers in 2015 by installed active integrated cement production capacity. Source: The Global Cement Directory 2015 and Global Cement research.

Plant news

In recent months many announcements have been made of upgrades and expansions, and even one relocation, within Turkey's cement sector.

In December 2013, Oyak's Bolu Çimento ordered three vertical roller mills from Gebr Pfeiffer for a new production line at its grinding plant in Kazan, Ankara. The mill will expand the existing grinding plant into an integrated cement plant. One 320t/hr capacity MPS 4500 B mill with 3150kW of drive power for raw material grinding to a fineness of 12% residue on the 0.090mm screen was ordered. Also included was an MPS 225 BK vertical roller mill, which will grind 20t/hr of petcoke to a fineness of 3% residue on the 0.09mm screen and 35t/hr of lignite to the same specifications. The third mill was a 130t/hr MPS 4500 BC mill with 3300kW of drive power, which will grind CEM I to a specific surface of 3900cm²/g Blaine. In April 2014 KHD was asked to supply a 3500t/day clinker line to the same plant, to be commissioned in the spring of 2015. The order included engineering, equipment supply and advisory services for installation and commissioning.

In January 2014 the International Finance Corporation (IFC) agreed to give Çimko Çimento a US$40m loan from its own account and a US$25m syndicated loan from BNP Paribas Fortis, mobilised by the IFC. The investments will enable Çimko to reduce its greenhouse gas emissions, supply more cement to the domestic market and export more cement to Middle East and North Africa. Çimko is a joint venture between Turkey's Sanko Group and Italy's Cementerie Aldo Barbetti.

In April 2014 Göltaş Göller Bolgesi Çimento contracted China's Catic Beijing Co to set up a US$14.7m WHR system at its cement plant in Isparta. The system is expected to be installed in 2016 and should reduce the plant's electricity costs by 25%. This followed a July 2013 contract with Loesche for the supply of a 230t/hr type LM 56.3+3 vertical roller mill. Also in April 2014, Bursa Çimento Fabrikası started operation of its 7.5MW WHR system at its cement plant in Bursa. The US$15m system can generate 50MkWh of electricity from waste heat and avoid 28,000t/yr of CO₂ emissions.

In June 2014 Gebr Pfeiffer received an order from Oyak's Bolu Çimento for an 85t/hr MPS 4500 BC mill to grind granulated blast furnace slag (GBFS) at its Bolu plant. The GBFS will be ground to a product fineness of 4500 - 4750cm²/g. Gebr Pfeiffer's scope includes the core components of the mill and classifier as well as the mill gearbox. The delivery of the mill was scheduled for early 2015. June 2014 saw Gebr Pfeiffer receive another Turkish order, from plant builder Bilim Makina for four mills destined for Çimentaş Elazığ's (part of Cementir) cement plant in Elazığ. It included a 35t/hr MPS 250 BK roller mill with 500kW of drive power for grinding coal into petcoke and two safety shut-off dampers. The material will be ground to a fineness of 3.5% R90µm. Also included was a 470t/hr MPS 5000 B mill, which has 3800kW of drive power and grinds to a fineness of 12% R90µm. Two 200t/hr MPS 5000 BC vertical roller mills with 4400kW of drive power each, were ordered for grinding cement to Blaine 3400cm²/g. All of the mills were scheduled to be delivered to Çimentaş Elazığ in the spring of 2015.

Simultaneously, Austria's A TEC Production & Services GmbH was redesigning the four cyclone stages, riser ducts and related equipment of the preheater tower at the same plant. The project aims to reduce the total preheater pressure drop by 25% and to increase production capacity by at least 8% on a sustainable basis. The first stage was completed in May 2014, while the second, third and fourth stages were started in 2014 and are due for completion in 2015. Phase one resulted in a sustainable production increase of 8% and a pressure drop reduction at the fan inlet by 19%. It is expected that the pressure drop before the fan will be reduced beyond the target 25% after completion of phase two, which will allow higher production at less specific power consumption on the fan than initially targeted.

In August 2014 Limak Çimento announced that it would partner with Ivory Coast-based Akfirbat to set up a US$50m grinding and packaging plant in the Ivory Coast's capital Abidjan. The two companies held a signing ceremony in Ankara for the establishment of a joint venture company called Limak Afrika SA. The plant will have 1Mt/yr of grinding capacity and 1Mm³/yr of concrete production capacity. Operations are expected to begin in October 2015. The plant's production will be sold in the Ivory Coast and other African countries.

In November 2014 Afyon Çimento, part of Çimsa, allocated US$140m to relocate and upgrade its 550,000t/yr capacity cement plant from Afyonkarahisar City, Afyon, to Halimoru Village in Afyon.

Acquisitions

In March 2014 Cementir announced plans to close a deal within 12 months that could enhance its position in the white cement industry. Company CEO Francesco Caltagirone said that Cementir was
looking at potential acquisitions in the US, sub-Saharan Africa and the Far East. Cementir also planned to boost its waste management operations in Europe, beyond the markets in Turkey and northern England where it is currently focused. No additional details have since been forthcoming.

In April 2014 Oyak announced that it was looking into acquisition opportunities in the cement sector, mainly in Europe (specifically the UK) and Africa, according to its cement group chairman Celalettin Caglar. Oyak added that it was interested in acquisition opportunities, especially in Romania, Hungary and Serbia, that could arise from the LafargeHolcim merger and prepared US$2bn in cash ready for such acquisitions. In September 2014 Sabancı Holding also announced plans to bid for LafargeHolcim assets. "Sabancı is interested in these sales. Preparations are being made to make a bid in December 2014," said a Sabancı spokesperson. Although CRH has recently entered into a US$6.89bn agreement to acquire a large portion of the LafargeHolcim assets in Europe, Canada, Brazil and the Philippines, other assets may still be available for purchase by Turkey's producers.

In August 2014 Ireland's CRH and Eren Holding hired JP Morgan Chase & Co to help sell their 50/50 Turkish cement joint venture, Denizli Çimento. Sabancı Holding, Limak Çimento and Oyak all announced interested in the plant. Denizli produces about 31% of western Turkey's total clinker output. On 10 November 2014, Oyak completed the purchase of Denizli Çimento for US$400 - 450m.

In January 2015 Sançim Cimento was acquired by Aşkale Çimento, a joint venture of Sönmez Holding (43%), Aunde Teknik (38%), E.N.A. Tekstil (10%) and Umut Insaat (9%). The acquisition followed the aborted purchase of Sançim by Çimsa for US$194m.

Outlook

According to the IMF, Turkey's GDP will grow by 3% in 2015, following 4% growth in 2013 and 3.3% in 2014. Growth is set to remain stronger than emerging and developing European countries, but weaker than the world average. The IMF has predicted that growth will shift towards private consumption and investment due to the delayed effect of recent monetary easing predicted for 2015. Al-Monitor reported that although 2014 saw Turkey's economy fall short of most of its targets, 2015 would be positive for Turkey thanks to falling oil and natural gas prices.⁵ These, it said, should boost economic growth and decrease the deficit and inflation.

A large number of projects are expected to continue to drive Turkey's construction and cement industries in the near future. These include highways, a road tunnel under the Bosphorus Strait, stadia constructions and new metro lines. In addition, Turkey plans to construct the world's largest airport in Istanbul for around US$5.6bn.⁶ The airport will ultimately have six runways and be able to process 150m/yr passengers. The first stage is scheduled to be completed in 2017 and is expected to require a significant quantity of construction materials, including cement.

Turkey's cement producers are well-prepared for growing cement demand amid a strong construction sector. Although no new plants have been announced so far in 2014 - 2015, Turkish producers appear to prefer to expand existing plants to increase their production capacity. Indeed, nine integrated cement plants are currently undergoing upgrade or expansion projects that will see >11Mt/yr of additional integrated capacity added within the next few years (Figure 2). Oyak has forecast that, in 2015, domestic cement demand will grow by 5% year-on-year thanks to the general elections, strong infrastructure investments and rising demand for residential construction and urban regeneration projects.

An increasing focus on environmentally-friendly cement production can be expected, judging from the TCMA's participation in Turkey's Waste Management Symposium on 29 January 2015.⁷ The key topics of the TCMA's 13th International Technical Seminar and Exhibition on 7 - 10 October 2015 highlight the same trend; low-carbon technologies, industrial symbiosis, use of wastes and innovation and new technologies will all be covered.⁸ Waste heat recovery and alternative firing systems are likely to become more frequent orders from cement producers.

In summary, Turkey's cement sector is likely to grow at a steady pace for the foreseeable future thanks to healthy demand by the domestic and export markets. Low oil and gas prices, which many now believe will endure much longer than initially expected, will provide a boost to Turkish cement production costs and increase profitability.

Table 4: The GDP growth rates in 2013 and 2014 and forecasts for 2015 in Turkey, emerging and developing Europe and the world. Source: The IMF World Economic Outlook October 2014 and Al-Monitor (for 2014 GDP growth).

References

1. https://www.cia.gov/library/publications/the-world-factbook/geos/tu.html.
2. http://www.tcma.org.tr/ENG/.
3. http://minerals.usgs.gov/minerals/pubs/commodity/cement/mcs-2015-cemen.pdf.
4. http://www.zadaca.ws/oyak/uploads/yatirimci/2015.02.18%20OYAK%20Cement%20Group%202014%20Results%20Note.pdf.
5. http://www.al-monitor.com/pulse/originals/2015/01/turkey-fails-key-economic-targets.html#.
6. http://www.telegraph.co.uk/travel/travelnews/9823643/Istanbul-plans-worlds-biggest-airport.html.
7. http://www.tcma.org.tr/ENG/index.php?page=habergoster&hbrID=106.
8. http://www.tcma.org.tr/ENG/index.php?page=habergoster&hbrID=105.