Erdemir sees no recovery in demand

LONDON (Reuters) - Turkey's largest steelmaker Erdemir (EREGL.IS) has left its options open for further production cuts as it does not expect collapsed steel demand to recover any time soon.

"I don't see the demand recovering significantly," Coskun Ulusoy, chairman of Erdemir, Europe's eighth largest steelmaker told the Reuters Global Mining and Steel Summit in London.

Global steel demand and prices have tumbled since mid-2008, as recession slashed demand from key steel consumer sectors such as automotive and construction, forcing steelmakers across the globe to reduce production sharply.

"We're talking about five years to go back to the good, old days," he said, referring to the demand levels seen in 2007 and 2008. Global crude steel production fell to 1.33 billion tonnes in 2008, from a record of 1.345 billion tonnes in 2007.

Ulusoy said currently the Eregli plant in northern Turkey was running at full capacity, while production at Isdemir, located in southern Turkey was at 70 percent.

"We can go to 50 percent in Isdemir if circumstances warrant it," Ulusoy said. The Group has total crude steel capacity of 10.8 million tonnes.

The Eregli plant was producing a form of specialty flat steel, used in pipelines, which allowed production to be kept high as demand for that product remained resilient, Ulusoy said.

But for long products, which are used in construction, he predicted a grim picture.

"Long steel is not going to be a happy story this year," he said, adding that the demand from Dubai, the main export market for that material, has dried up.

NOT AS FAVOURABLE

The bleak demand outlook in the $800 billion steel industry has forced to company to give a second thought to its expansion plans.

Ulusoy said the company had some $1.7 billion worth of investment plans for the next several years, which are now frozen due to the economic downturn.

He said previously the company projected to spend $219 million in 2009, but has shelved this as the recession deepened.

"It's going to be delayed now," he said, without giving a time frame.

He also said the deterioration in demand in the fourth quarter will be visible in the year-end results, due later this week.

"The end-year results will not be as favorable we hoped, simply because of the last quarter," Ulusoy said, without giving further details.

A Reuters poll showed on Monday that the company is seen posting a 325 million lira ($180 million) loss in the fourth quarter due to rapidly declining steel prices.

Ulusoy said the company, which has launched a voluntary redundancy scheme, will not post a loss for the whole year, but is very exposed to currency risk.

The Turkish lira has lost some 17 percent against the dollar since the start of the year.

Erdemir posted nine-month net profit of 1.4 billion and is seen with a full-year net profit of 1.08 billion lira, the Reuters poll showed.

Ulusoy said Erdemir was importing 80 percent of its iron ore and using its iron ore mine in eastern Turkey for its remaining needs.

"We want to be more self-reliant in terms of raw materials," he said.

(For summit blog: blogs.reuters.com/summits/)

(Reporting by Humeyra Pamuk; Editing by Hans Peters)