How has the MarZinc project been progressing since the last time we talked? When do you think zinc recycling is going to start?

There are five partners in the project: Kaptan Demir Celik, Diler Demir Celik, Kroman Demir Celik, Icdas ve Colakoglu Metalurji.

The initial plan was to set up the plant in the Mustafa Kemal Pasa Organized Industrial Zone in Bursa. However, after the receipt of the Environmental Impact Evaluation (EIA) report, execution of the project was suspended by the authorities. Considering the long process foreseen for this area, we decided to construct the plant in the organized industrial area in Karabuk. The decision was followed by a protocol signed with the governorship of Karabuk. We discussed the issue with the chamber of industry, the chamber of commerce and the municipality. Currently, the revisions in the construction plan are being made and we have filed a EIA application with the Ministry of Environment.

I presume that the EIA process will be completed in two months, followed by the beginning of the construction work right away. We plan to commission the project in eight months.

The Bursa project is currently suspended, but we continue to pursue the legal avenue as we believe in the rightfulness of our cause regarding the issue. If we prevail, we will proceed with that investment as well, given Bursa's good location between Izmir and Istanbul, highly suitable to service the plants in Aliaga.

Turning to the scrap markets and their impact on steel producers. how do you think the situation is going to evolve in the final quarter?

I do not expect big hikes in scrap prices. I believe the scrap markets are going to follow a flat trend. There are a couple reasons supporting this idea: on the one hand, the winter conditions and the weak American dollar might lift scrap prices up; on the other, the negative effect of winter on steel production in the northern hemisphere should be taken into consideration. Seasonal conditions will push steel mills to reduce output to some extent, pushing scrap consumption down.

In Europe, the October scrap deals have not been completed yet. A €20-30/mt discount is expected to be made. As you reported on your website on October 4, the US local markets are down $40/mt. These are the factors that are likely to push the prices down. Putting the two aspects together, a flat trend seems likely.

For example, while the European offers on euro-basis can be pushed down, the US dollar-based ones cannot, resulting in parity. Therefore, I believe the prices will continue at current levels.

Do you expect an increase in demand before the end of the year?

No, we do not expect significant changes. We believe that demand will continue at current levels.

During the conference, Turkish producers were criticized for not cutting down on production enough. Can we have your thoughts on this?

Exports have been down 45 percent in the period in question. Taking into account that 60 percent of production goes to exports and local consumption has stayed put, the fall in exports means that a 20-25 percent cut in output has been made.
Do you think this percentage might increase?

I do not foresee a further decrease in production. We have seen the major drops in 2009. In 2010, Egypt has been out of the picture and we have faced this reality. However, I believe Turkey has a key advantage; currently, the country is almost the only source of rebar in the context of trade in international waters. Today, when Africa seeks to import rebar, Turkey is the source that springs to mind. Brazil and Spain become influential from time to time, but, looking at the broader picture, Turkey is the only supplier. As soon as Singapore becomes active in the market after years of silence, Turkey supplies the country with 500,000 mt of rebar. Iraq livens up and Ethiopia carries out new projects - both look to Turkey for rebar. The market choices are diverse for Turkey, thus, a decrease in production is not likely as long as we are able to sell our products at logical price levels.

What is your current rebar and flat steel output?

Three and a half months have passed since we commissioned our flat steel hot rolling mill. As of today, we are able to produce at 120,000 mt per month. But this does not mean that we produce exactly 120,000 mt, since the volume depends on the market situation, the demand level and quality levels. However, with respect to production speed, we have reached a monthly volume of 120,000 mt.

We commissioned our rebar rolling mill in mid-July this year in a different location, following a break for two years,. Since rebar prices are not as attractive as compared to billet prices, we are running the rolling mill in a single shift, during the time of day when electricity tariffs are cheaper. We are trying to lower our costs, and to produce as much as can be sold. We can increase the output by next spring, when the market begins to rise. But we are not producing just for the sake of producing, we need to be able to sell as well.

In the past, we were producing at 700-750,000 metric tons. After two years of an interval, our monthly output stands at 20,000 mt, instead of 60,000 mt. We have cut the production rate by 70 percent.

However, regarding steel billet, the situation is different. Last year and at the beginning of this year, we continued the production, stopping in periods when the electricity tariff was higher. But since we started producing flat steel, we need to produce slab. So we are using a large portion of our capacity to produce slab, which results in reduced billet capacity, which is nevertheless able to meet the reduced market for billet. For now, we are operating with such a balance.

So, can we say that the situation in the flat steel market is better as compared to the long steel market?

Certainly, because the depth of the flat steel market is quite different as compared to the longs market. We see that, in worldwide steel production and consumption, long steel products have one third of the market, while flats account for the remainder, since long steel products are linked just to the construction industry. However, in the sectors where consumption is more consistent, such as automotive, white goods manufacturing and the shipbuilding industry, flat steel products are used.

What is your current slab production capacity? What is the rate of capacity usage?

Our annual slab casting capacity is 3.5 million mt. However out liquid steel capacity is lower. We started slab production at our new facility in mid-2007 and we have to date exported some quantities of slab. If the market conditions get better, we will export slabs again. From now on, our monthly slab output will be approximately 250,000 mt.

From time to time we hear of your slab export sales. Normally, do you use your slab output in house or do you consistently conclude external slab sales?

As you know, slab is not a commodity traded like billet. It is a semi-finished product sold regularly by the producer to the consumer. Thus, traders are not involved too much in slab sales.

Before the commissioning of our flat steel facility, we had some customers to whom we supplied slab. However, since our own production started that situation has now changed.

Recently, we heard that Çolakoğlu Metalurji will be acquired by another steel producer. Could you update us on this matter?

Sometimes, groundless rumors can be heard. We also come across such rumors, not just about our company, but about other companies as well. Unfortunately, it is impossible to prevent such stories.

What are the objectives of Çolakoğlu Metalurji for its long and flat steel production, both in the local and foreign markets?

First of all, we will develop our new flat steel business. Even if our company has 50 years of expertise in the long steel segment, the flat steel segment is new to us, and so our primary goal is to establish it on a solid base. What we have to do is to ensure customer satisfaction and achieve consistency, by gaining ground with high quality products.

We are aiming to supply two third of our production to the local market and the rest to the export markets. Even though we, so far, have generally supplied to the local market, we also have some transactions to the export markets. We have started supplying to neighboring regions and we seek to extend the range of our exports gradually. Currently, we are assessing the Mediterranean region, and, next year, we are targeting the Americas, the Far East and the Middle East markets.

In brief, our goals are primarily concentrating on the flat steel business and to continue our steel bar business as before.