Leading Türkiye’s steel production, we compete globally with the world’s leading steel producers, reinforced by our long-established business culture, agile operational talent, and superior financial performance.
Dear Stakeholders, Business Partners and Colleagues,
Our country experienced the greatest catastrophe in its history on February 6, 2023. This earthquake claimed the lives of tens of thousands of citizens and injured hundreds of thousands more people. One of the many cities impacted by the earthquake is İskenderun and, tragically, we also lost colleagues in this disaster. I wish God’s mercy to all our citizens and colleagues who lost their lives in the earthquake, and I extend my sincerest condolences to their relatives. On the first day of the disaster, we swiftly commenced aid efforts in the region through our OYAK Crisis Coordination Center. Our greatest healing force during such a disaster has been our never-ending spirit of solidarity. We will get through these difficult times in unity and solidarity, heal the wounds of İsdemir, one of our locomotive companies, and make it stronger than ever. Despite these challenges, we will continue to do our part with great enthusiasm and faith, striving to do our jobs better each day and looking forward to the future of our nation with even more hope. The post-pandemic recovery in the world economy, followed by record growth, gave way to very challenging processes in 2022. I would like to share highlights from our activities in 2022.
Period of risk and uncertainty in the global economy
A principal development during this challenging year was the hot war between Russia and Ukraine, which began in February. As well as causing a tremendous humanitarian crisis, the war provoked a number of issues in the global economy. Soaring energy and commodity prices significantly raised costs across many industries. Increases in costs of living accompanied mounting inflation, affecting not only underdeveloped and developing countries but, also, for the first time in many years, developed countries. Furthermore, supply chains and logistics balances, disrupted during the pandemic, could not be restored to pre-pandemic levels; markets could not fully open due to the impact of the COVID-19 pandemic, which persisted in some areas of China. While these changes produced supply interruptions around the world, the increased costs contributed to a drop in company profitability. The International Monetary Fund (IMF) announced that economic growth, realized as 6% in 2021, had sloped downward and was realized as 3.4% in 2022. The IMF predicted that economic growth is projected to fall to 2.9% in 2023. The World Trade Organization’s (WTO) Global Goods Trade Barometer Report indicated that, despite the 5.6% increase in the third quarter of 2022 with respect to the previous year, the growth in global goods trade volume lost momentum in the final quarter.
In 2021, the United States, one of the world’s largest economies, recorded its strongest annual growth since 1984, with 5.9%. However, this value dropped to 2.2% in 2022. Although diminished consumer demand, due to declining income levels, played an important role in the deceleration in growth, high interest rates also had a negative impact, especially on housing industry expenditures. A similar deceleration was observed in the European economy, which is Türkiye’s largest export market. As a result, the EU economy is expected to grow by 3.6% in 2022. China, another global player, grew by only 3% last year, even though it achieved 8.4% growth in 2021.
Turkiye took advantage of its geopolitical position
Despite all these difficulties globally and in the world’s largest economies, Türkiye was among the economies exhibiting the most growth, increasing 5.6% even amid the uncertain environment of 2022. With the implementation of policies aimed at increasing foreign direct investment, Türkiye continues to offer the potential to become a production hub capable of resolving global supply chain problems, thanks to our country’s entrepreneurship, trained human resources and geopolitical position.
Energy costs up, global steel production down
The steel industry was one of the industries most affected by global economic conditions. As the energy crisis worsened and demand was suppressed due to the COVID pandemic, particularly in China, global crude steel production declined by 4.3% in 2022. The Turkish steel industry contracted by 13% during the same period. Nevertheless, with 35.1 million tons of crude steel produced, our country was the eighth-largest producer worldwide, following Germany. In addition to dwindling demand in the wake of the Russia-Ukraine war, protectionist measures implemented by the EU and USA, and the negative effect of high energy costs on the competitiveness of the industry, resulted in a 23.5% decrease in national exports. In 2022, Türkiye recorded 14.4 million tons of finished product exports, including 4.7 million tons of flat steel. The Middle East and North Africa (MENA) Region and the Commonwealth of Independent States (CIS) were regions where flat finished product exports increased. In 2022, record high levels were reached in exports to MENA and an increase of 66% was recorded. Türkiye’s long finished product export was again highest in the MENA region, despite a 10% decline. In second place was the EU, with an increase of 26%. South America ranked third.
We steer the industry as a global steel force
As we reach our 60th anniversary, OYAK Mining Metallurgy Companies continues to add value to our country and its stakeholders, acting as Türkiye’s global steel force in 2022 with its focus on sustainable growth, responsible production and a people-centered approach. While leading Türkiye’s steel production with the strength of our stakeholders and business partners, not only do we steer our industry, but we also compete globally with the world’s leading steel producers, reinforced by our long-established business culture, agile operational talent, and superior financial performance. In 2022, our crude steel production was 7.8 million tons. Our companies exported a total of 1.1 million tons of finished products, including 1.1 million tons of flat products and 67,000 tons of long products. This amount constitutes 15% of our total sales. Our OYAK Mining Metallurgy Companies achieved strong consolidated financial results in 2022, thanks to their effective operational talents. While our EBITDA value reached USD 1,714 million, our EBITDA margin stood at 21.1%. Thus, our year-end net profit was USD 1,142 million and our net profit margin was 14.1%.
Strategic investment decision of USD 550 million
This past year, our main focus areas were low costs, high productivity, and innovative solutions in investment activities in our facilities. In 2022, the number of ongoing projects at Erdemir and İsdemir reached 35. A pelletizing facility is planned to be established at the iron mine site located in Bingöl Avnik, owned by Ermaden, one of our Mining Metallurgy Companies, with an investment to be made by Erdemir. Türkiye’s national resources are aimed to be introduced into the economy through the facility, to be launched with a USD 550 million investment; as well, the facility is anticipated to significantly contribute to employment in both the construction and operation phases. The foundation of this facility will be laid in the 100th anniversary of our Republic and it is planned to be operational in three years. Erdemir’s new coke production facility is another of our investments that will witness our Republic’s new century. Featuring high environmental performance and automation levels, this investment will carry the Company into the future, reducing Erdemir’s foreign dependency. Replacing the first and second batteries that have been serving since our establishment, the investment for a new fourth coke battery, offering an annual capacity of 800 thousand tons, will be taken up in the first quarter of 2024. Through the new 3rd Coke Battery Modernization Project implemented at İsdemir in 2022, we aim to increase the by-product sales volume, save energy, and prevent imports by increasing metallurgic coke production. During the year, Erdemir’s sixth steam boiler, another investment, was commissioned. Our new steam boiler, which allows for more efficient and productive use of by-product gases in our facilities and has a production capacity of 160 tons per hour, covers an important part of Erdemir’s electricity production needs.
Further steps for sustainability and the circular economy
Our Mining Metallurgy Companies, which are among Türkiye’s largest industrial organizations, continue to take steps towards sustainability with strong financial performances achieved through effective cost and dynamic capacity management. We produce steel, one of the main raw materials for industry, and our contribution to the economic cycle and development of the market is evident. In addition to our production and export volume, we serve our country’s sustainable development through the employment we create and throughout our value chain. Responsible production continues to drive our fundamental approach. At Mining Metallurgy Companies, we have determined as our main focus areas the effective and efficient utilization of existing resources, to fulfil our environmental responsibility; and continuously improving our environmental performance, to leave a cleaner and livable world to future generations. In line with our environmental policy, we assess potential environmental risks in the course of our production activities and take measures to counter those risks. We monitor our environmental impacts through continuous measurements and then bring those impacts under control. Concurrently, we implement improvement and investment projects in a manner designed to minimize these impacts. The policies and processes we design are aimed at mitigating our environmental impacts, improving our energy utilization, ensuring effective use of resources, and reducing waste throughout the entire value chain. We also aim to promote recycling in every phase of the activity cycle, while also retaining and developing our human capital.
In November 2022, Türkiye’s National Contribution Statement was announced during the 27th United Nations Climate Change Conference (COP 27). Türkiye raised its emission reduction target, announced as 21% for 2030, to 41% within the framework of the National Contribution Statement. In this context, we are striving to build our country’s future together by taking part in the planned activities. As we contribute to the protection of natural resources and the environment at our Mining Metallurgy Companies through activities directed towards ensuring the effective use of energy, we achieve a competitive advantage. We have reduced our greenhouse gas emissions through energy savings, achieved as a result of systematic activities aimed at energy efficiency. Additionally, we are one of Türkiye’s largest job providers. With 12,659 employees, we operate with a strong and widespread sphere of influence in the regions where we operate. Within this scope, we also create indirect employment for approximately 300,000 people. Accordingly, we support regional development in the geographical regions in which we operate, also contributing to the socio-economic development of local communities. In 2023, even as we commemorate the 100th anniversary of our Republic with great pride, the year may bring with it many uncertainties. No matter how difficult it may get, our greatest strength is and will always be the love and dedication we feel for our country. Most of all, I thank the Armed Forces Pension Fund (OYAK), whose past, present, and future support we always feel with us, and our shareholders, customers, suppliers, colleagues and all our other stakeholders.
Sincerely,