12.05.2015 Innovation in the steel sector: TURKISH STEEL INDUSTRY Yasin ÖCAL Planning Expert Ministry of Development Republic of Turkey 1 12.05.2015 , OECD, Paris Contents : 1. Developments in Turkish Steel Industry 2. Policies for Turkish Steel Industry Types of Innovation (The «4 P’S ») and Outcomes in Steel Industry 3. 4. Investments in Turkish Steel Industry 5. Waste Management in Iron and Steel Industry 6. Conclusions 2 1
12.05.2015 Developments in Turkish Steel Industry (1): 60.0 25.0 Capacity & Production (Million Tons) 50.0 20.0 Export (Billion Dollar) 40.0 15.0 30.0 10.0 20.0 5.0 10.0 YEARS Source: Turkish Steel Producers Association (2015) 0.0 0.0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Capacity (million tons) Crude Steel Production (million tons) Export (billion dollar) • Production and export only fell in 2009 due to the global crisis. • After the year 2012 export and production declined for two consecutive years. 3 Developments in Turkish Steel Industry (2): The cause of these negative developments can be summarized as follows: • Decrease in export (cause decrease in capacity utilization rates) • Slow down in China’s domestic demand force them to find new export areas • The ongoing political instability in MENA region • Decrease in competitiveness • Due to the high share of EAF production methods in the total production, the effects of dramatic decline in iron ore prices have been felt more seriously. • Environment-related taxes are higher as compared to those of global competitors (1) . • The producers in the domestic market could not benefit from the decline in energy prices in global markets. • High share of imports in domestic demand • Although sufficient capacity has been created in domestic market, a major portion of demand for high value-added products is still met by imports. (1) OECD (2014), Environment Working Paper No. 71: Tax preferences for environmental goals: Use, limitations and preferred practices, (ENV/WKP(2014)8), p.10, 4 OECD Publishing, Paris 2
12.05.2015 Policy of Turkish Steel Industry: Recent policies focus on increasing competitiveness and share in world export by using R&D and innovation as main tool: • The primary aim of 10 th Development Plan (2014-2018) is “ To increase Turkey’s international competitiveness and its share in world exports, the main objective is transforming the manufacturing industry so that a high value-added production structure and increased share of high-technology sectors are achieved ” (2) . • The primary aim of R&D and innovation policy is contributing to increase of technology and innovation activities with a private sector focus and get benefits from these activities , to commercialization of results of R&D activities via constituting an innovation based ecosystem, and to achievement of high global competitive power with branded technology products. • Policy for Iron and Steel Industry in 10 th Development Plan: • In the basic metals industry, sustainable and secure procurement of inputs will be ensured. • Diversification in products that bear higher value-added and are imported will be ensured by increasing their weight in domestic production. • Policy for Waste Management in 10 th Development Plan aims giving importance to the practices of recycling and recovery in the industry. • Turkish Iron & Steel Industry And Nonferrous Strategy Document and Action Plan 2012-2016 (3) and The Input Supply Strategy (GİTES ) (4) contain many actions to increase competitiveness of Turkish Steel Industry. (2) http://www.mod.gov.tr/ (3) http://sanayipolitikalari.sanayi.gov.tr/ 5 (4) http://www.economy.gov.tr/ Types of Innovation (5) (The «4P ’ S») and Outcomes in Steel Industry: • Product Innovation : The most commonly understood form of innovation is that which introduces or improves a product or service – a change in what is offered to end users. • Design of new materials with better physical and chemical properties (Such as HSLA alloys, Stainless Steel) • Process Innovation: Innovations can also focus on processes through which products are created or delivered. Because so many of the products used in relief settings are initially developed for non- relief contexts, a natural focus for humanitarian innovation is to consider how an existing product might be used in resource-poor or rapidly changing settings. • Designs that reduce emissions and wastes and increase efficiency in production (Such as Waste management, applications of industrial symbiosis) • Position Innovation: The third focus of innovation changes in the context in which the products are introduced. • Products for a mass market (Such as improvement of ingot casting to continuous casting) • Paradigm Innovation: Paradigm-based innovations relate to the mental models which shape what an organization or business is about. • EAF, with its differences from traditional manufacturing methods, was exactly an example of this types of innovation in the end of 1800 ’s . ( Even though it seems less profitable nowadays due to low iron ore prices. ) 6 (5) http://www.elrha.org/hif/innovation-resource-hub/innovation-explained/types-innovation/#1 3
12.05.2015 Investments in Turkish Steel Industry (1): Environmental Protection and Energy Efficiency The Turkish Steel Industry has invested around US $ 1 billion for the projects that aimed at increasing environmental protection and energy efficiency in the past 15 years (6) . As a result of these efforts: • Energy consumption decreased 22 percent per ton of crude steel between 2000-2012 (7) • The crude steel production amount per employee increased 74 percent between 2000-2012 (7) Also in this period, some research studies for waste management have been conducted by several universities: • Kocaeli University Department of Environmental Engineering Report (December, 2004): The report showed that " Storing the slag waste, that is a water-insoluble inert material, will not affect the ground water. " • Bogazici University Institute of Environmental Science Report (April, 2005): The report showed that "Slag content can be used as filler materials. Also slag can be used as the isolation of other waste by the process of solidification, cement manufacturing material and pellets or in the construction of the road surface (brick, tile, etc.)" • ITU TAGEM Technology R&D and Consulting Center Report (June, 2012): The report mentioned that "There were some technical reports on the availability of global using of the steel mill slag aggregate for concrete and asphalt production." • General Directorate of Highways, ITU, Colakoglu Metallurgy and Turkish Steel Producers Association working on a new R&D Project (2014): "The BOF slag can be used as a standard product on highways . " • Etc … (6) Turkish Steel Producers Association (2015) (7) Ministry of Development, Iron And Steel Industry Working Group Report, 2014 7 Investments in Turkish Steel Industry (2): R&D and Innovation Investments The First “Iron & Steel Institute” of Turkey established in July 3 rd 2011 at Karabuk University (8) . o The researches in Karabuk University Iron and Steel Institute (KISI) are proposed to focus on new development strategies, increasing qualities of steel products and production of high value-added steels , recycling of wastes, increasing of efficiency in iron steel plants , making researches in use of domestic raw material and ores in effectively and efficiently. o KISI also proposes to make or coordinate researches with the producer, the user, the government and private organizations who make researches in the field, and give support to the strategies and policies in Iron and Steel Industry of Turkey. The first “Steel Testing and Research Center” of Turkey will be established in the Istanbul Technical University (ITU): a joint venture of ITU and Turkish Steel Exporters’ Association (9) . o Studies will be carried out on this center for steel and steel related sector. For the aims of reducing the cost of test analysis, increasing the sector's competitiveness, improving the R&D and innovation capacity and doing the appropriate conformity assessment for domestic and foreign sales. Turkey’s first “ Steel R&D C enter” established by ERDEMİR Group (10) . o The R&D Center established at the Eregli Iron & Steel Facilities, which is the principal company of Erdemir Group, will serve for the spreading of a development model that is based on high-tech, value-added products and information. o The goal of Erdemir Group is to turn this First Ministry-Approved R&D Center of the Turkish Steel Sector into an “Advanced Steel Research Center” in the long term. (8) http://dce.karabuk.edu.tr/defaulteng.htm (9) http://www.itu.edu.tr/ 8 (10) http://en.erdemir.com.tr/ 4
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