Mehves Ozer: Norecom is setting up new operation in Turkey

Asian Metal: Mehves, thank you for taking the time to talk with Asian Metal. Could you please give a brief introduction or background of Norecom?

Mehves: Norecom was found over half a century ago started as trader. In beginning of 2000, the management decided to move more into production; presently Norecom operates in 3 industrial sectors; we are producing 800,000 tonnes of billets, and 350,000 tonnes of long products pulp and paper. As one of world players having production units in Europe, lately we invested over USD150 millions in Middle East for a green field project of duplex. On the mining front, we have mines in dolomite, lime.

Norecom is also heavily involved in the trade of ferroalloys, met coke, coking coal and other carbon base raw material for steel industries. Many first class steel producers like SABIC, QATAR etc have been our customers for several years.

Norecom has production facilities and offices in Germany, Bulgaria, RomanIa, Turkey Russia, Ukraine, Cyprus, Dubai, China and etc.

Asian Metal: What is Norecom’s position in the chrome industry?

Mehves: Norecom has recently opened an office in Turkey, planning to expand its activities in mining. Turkey is the origin of many minerals especially in chrome ore. Today the mineral exports have an important role in the exports of Turkey. Norecom made the first step in chrome industry exporting Turkish chrome ore. In the medium term, Norecom is planning to bring a new purchase programme for export, allowing its suppliers to be able to schedule themselves for better financing mode. In this model, Norecom and suppliers would create synergy for real win-win case.

In the ong term, considering the suppliers and their productivity, Norecom would like to be a direct investor in Turkey.

Asian Metal: Apart from the chrome operation, does Norecom has any other operation in Turkey or does Norecom have any plan to expand their business in Turkey?

Mehves: Norecom Turkey is a very new organisation, still under construction. Norecom is a regular supplier to steel industry in Turkey, and will be keeping its regular supplier position among main steel producers in Turkey. This position shall expand with further steps. Norecom pulp and paper section has long standing business in Turkey. After having completed the company structure, Norecom shall be able to operate in new fields locally as well.

Asian Metal: Although prices for Turkish chrome ore have moved up already in the first half of the year, many Turkish participants are still not satisfied with the increase, why?

Mehves: Turkish mining has experienced severe elimination after the 2008-2009 crisis. The survivors had breath in the second half of 2009 with increasing prices. This increase continued until 2011 while China realized that they had to control prices. China had long-term strategy and based on this strategy, China put limits to each supplying country in terms of prices. China tested the supply ability and price acceptability of each country. Unfortunately China noticed that Turkey could meet its demand at the price level over USD270/t. China imported the quantities of over 100,000 tonnes between USD275-290/t. Based on the market and weather conditions, China will hold the prices of Turkish chrome ore between these ranges.

Meanwhile I was protesting that Turkey should control its export, put some limits to exports of chrome or apply different strategy because Turkey is finishing its available reserves as the miners do not have enough finance or profit to expand their reserves. In the long run, both parties will suffer from ruining business; especially China would have less supply and shall not be able to control the prices. Today Turkish miners are finishing reserves that are easy accessible, they have to drill or work with low grades. When they work with the feeding of low grades, the production cost for the miners doubled comparing to recent years. Therefore they are not satisfied and target higher prices. Besides the ore cost, the other cost parameters also affect negatively Turkish miners, for example increase of gasoline price and electricity cost. Meanwhile the Turkish government has not been supportive to the miners. Many new restrictions have been applied to the miners, and licence applications or renewals are held at the Mining Department for a long time.

Therefore Turkish miners need higher price to survive and to provide continuality in the mining sector.

Asian Metal: What is your expectation for the second half of the year?

Mehves: In the chrome ore sector, it all depends on China and China will frequently revises its strategies based on the supplying countries dynamics. They have long term strategies and they are very successful in applying these strategies - the industry is disciplined and all players will somewhat unified the asking prices, even when they were restructuring the industry locally, they have not lost the control on prices.

During the restructuring, any old, inefficient and high energy consumed smelters are closed and China succeeded to attain its goal in reducing air pollution with this strategy. Meanwhile the traders who are weak in terms of finance or speculating the chrome industry have also disappeared during the restructuring. The stainless steel producers keep pressure on the ferrochrome smelters. Most of the Turkish suppliers were hopeful with expansions on ferrochrome smelters expecting higher demand. Unfortunately it did not materialise. The low purchase prices of the biggest players in stainless steel in the last quarter slow down the business in China. The suppliers were again hopeful with ending strikes in South Africa but the slow market did not allow them to reach their target price. But this time South Africa and Turkey are stubborn to reach their target price, I think Chinese ferrochrome prices have hit the bottom and now they also show resistance to activate the market with better prices. Generally summer season is also important factor for this slowdown. If suppliers could hold this attitude for at least 1-2months more, I am sure that prices will rebound USD5-10/t over current prices. We will never see again sharp increase as we experienced in the past.

Asian Metal: And for 2015?

Mehves: Next year I am expecting more stable market and better prices compared to this year. The reason is that the supply volume from Turkey, for the first time after years, shall be less than 2 million tons. Meanwhile India and Oman shall become important alternatives for Turkish miners determining their price. Most of the small miners shall not be in the market, they will disappear at the end of 2014 as they are not satisfied with current prices and due to the lack of finance. Besides, Turkey is also facing a big problem - drought - due to changing weather conditions, which could further limit the supply from Turkey.

Albanian, Iranian and Pakistani supplies would not be enough to replace the shortage of Turkey.

South Africa will give priority to its local end-users; its ferrochrome industry shall be more demanding.

So negative developments in the supply side will affect the supply situation and China will steadily improve the price range by like USD10-15/t max - always keeping control.

Asian Metal: Anything you would like to add?

Mehves: Today Turkish miners are really in difficulties in terms of mining conditions. As I mentioned the Turkish government does not support miners, putting so many restrictions on and holding back on licensing issues. While the Turkish miners suffer with high costs, the new problem of drought and permits from government, China should review its strategy allowing Turkish miners to invest for the future, which is in line with the future of the Chinese ferrochrome operations.

If Turkey loses its future in chrome ore, China will lose the second most important supplier in the world.

Chinese and Turkish chrome industry participants should be encouraged to build the future together.