Looking Ahead to 2025: Challenges and Opportunities

Dr. Hüseyin Soykan — EKİNCİLER Group General Manager and Executive Board Member

Double Threat for Steel Producers: Rising Costs and Declining Profitability

EKİNCİLER Group General Manager and Executive Board Member Dr. Hüseyin Soykan discussed the impact of global market developments on Turkish steel.

As a strategic industry directly affected by global and local economic conditions, the steel sector faced numerous challenges in 2024. High interest rate policies implemented to curb inflation led to a slowdown in industrial production and, consequently, a decline in steel demand, while pressure on exchange rates had a negative impact on exporters. On the other hand, construction activities in the earthquake zone provided partial support to the sector.

In foreign markets, the Russia-Ukraine war, tensions in the Middle East, and the economic stagnation in the European Union created a challenging environment for the sector. Regulations aimed at reducing the carbon footprint in global markets and increased competition are also pushing Turkish steel producers to develop new strategies. 

In this context, we spoke with Dr. Hüseyin Soykan, General Manager and Executive Board Member of Ekinciler Holding, about how the steel sector performed in 2024, the impact of current economic conditions on the sector, and expectations for 2025.

How did 2024 go for the Turkish steel sector?

As a natural consequence of the high interest rate policy initiated to curb inflation domestically, the slowdown in industrial activity dragged down steel consumption, while construction activities continuing in the earthquake zone had a positive impact on demand.

The suppression of the exchange rate, however, significantly reduced the Turkish lira equivalent of revenues, despite the increase in export tonnage. Abroad, ongoing geopolitical risks, including the continuing Russia-Ukraine war and Israel's attacks on Palestine and Lebanon, the slowdown in the EU economy, particularly in Germany, and the real estate problems in China, which has been growing rapidly for years, are noteworthy. In short, it was a disappointing year.

Despite rising production costs, how does the low exchange rate and continuing decline in steel demand affect companies and the steel sector? 

Despite increases in production costs, particularly energy, raw materials, and labor, the low exchange rate negatively affects the profitability of exporting companies. Compared to countries such as China and India, the decline in foreign exchange earnings significantly reduces the profitability of exporters in the global market.

Soykan: “The Turkish Steel Sector Faces Challenges in 2024”

High costs and declining demand, coupled with liquidity issues, are straining companies' cash flows and exposing financial vulnerabilities, placing significant pressure on small and medium-sized producers in particular.

During this difficult period for exports, implementing a competitive exchange rate policy, taking more effective protective measures against dumped imports, and keeping energy prices under control are of great importance for our sector to continue its activities in a sustainable manner.

How is the decarbonization process affecting the steel sector?

The green transition occupies an important place on the sector's agenda. Efforts to reduce carbon emissions and produce products with a low carbon footprint have become even more critical, particularly with the carbon regulation mechanism introduced by the European Union this year.

Turkish steel producers must intensify their investments in this area in order to maintain their competitive strength. For Turkish steel producers, adapting to this new process in the EU, which accounts for one-third of our export volume, means entering a critical period in terms of energy savings, production efficiency, and carbon management.

What are your predictions for 2025?

I can say that the Turkish steel sector will face significant challenges in 2025, which is expected to be shaped by global economic and political dynamics, domestic market conditions, environmental sustainability targets, and technological transformation.

On the other hand, the continuation of construction and infrastructure projects in our country, and especially the post-earthquake reconstruction process, will enable demand to remain at a certain level.

Meanwhile, I would like to draw attention to three global issues:

1. Economic developments in China, which accounts for more than half of the world's crude steel production, are emerging as the most important factor to monitor in global markets.

2. China's transition to a slowdown in steel production in its economic cycle is creating deflationary pressure for countries engaged in scrap-based production globally.

3. Efforts to reduce carbon footprints and promote sustainability, which are also crucial for the green steel trend, will increase global demand for scrap.

Potential export restrictions in the European market, which is of great importance to Turkey, will also have a significant impact on our country in 2025. Finally, I believe it would be beneficial to closely monitor the protectionist policies that Trump will implement. I see 2025 as a challenging year.

Finally, please share your views on the steel sector and anything else you would like to add...

Turkey exports significant amounts of steel, particularly to regions such as Europe, the Middle East, and Africa. As we enter the final year before the border carbon adjustment officially begins in Europe in 2026, Turkey will need to reassess its export strategies.

The Turkish steel sector must increase its efforts to produce high-value-added end products, even if in smaller quantities, alongside high-volume, low-cost production, in order to ensure competitiveness and sustainability.

This strategy will also be particularly beneficial for industries that demand high-quality materials, such as the automotive, aviation, and energy sectors.

The current geopolitical situation, which is likely to continue this year, may increase vulnerabilities, particularly in raw material and energy supply chains and trade relations.

Therefore, I believe it would be beneficial for the Turkish steel sector to develop more flexible strategies in both its supply and sales channels.

Despite all the challenges, the Turkish steel sector will continue to make maximum contributions to our country's economy as the backbone of our industry.

Rapor Magazine, April 2025.