Following its establishment in 1975, Turkish group Kurum Holding has grown to international stature, establishing itself as one of the main steel producers in the Balkan region. Due to the area's rapid economic development and bright future trade prospects, Kurum Holding selected the Balkan region as an attractive place to expand its operations and made a significant investment there. In 1998 the company acquired the largest integrated iron and steel factory in the Balkans, Elbasan Steel Works, and put the facility into operation under the Kurum name. In 2002, as part of an expansion of business activities in Albania, oxygen and lime facilities became operational, joining the existing iron and steel production. Currently, Kurum International is not only the largest steel producer, but also the biggest industrial investor in that country.
- In 1998, Kurum Holding acquired a steel facility in Albania. Why did you choose Albania for your first overseas operation?
Mr. Rifat Esen: In the late 1990s, the owner of Kurum Holding, Mr. Kurum, was searching for feedstock - i.e. billets to supply the group's longs rolling mill in Gebze, Turkey. After a long search, the group decided on Elbasan Steel Works, which was working at very low capacity, and most of whose operations were shut down at the time. The Albanian government of that time, in the first large scale privatization of industrial assets in the country's history, invited Kurum to take over the Elbasan Steelworks. After making a feasibility study that showed that the region had good investment prospects we decided to privatize the mill. However, at that time Albania did not have an ownership law or privatization legislation. That is why the current facility in Elbasan is on a 20-year tenancy agreement, which is to expire in 2019. Now the privatization laws and legislations are in place and the procedure for full privatization of the assets has already commenced.
- Could you tell us a bit about Kurum's facility in Albania?
Dr. Zeki Kaya: When Kurum acquired the Elbasan Steel Works, its total production capacity was slightly more than 20,000 mt of billets. Now the mill has an annual production capacity of 400,000 mt of billets, which is planned to be increased in the coming years. While Elbasan Steel Works was initially intended to produce only one type of product, now it operates four different rolling mills, which produce rebar and structural steel for the construction industry and also wire-mesh.
- With your Albanian facility which markets do you target?
Dr. Zeki Kaya: Our production facilities in Albania are working to satisfy the steel demand of Albania and of neighboring countries such as Kosovo, Macedonia, Serbia and other Balkan markets. Currently, we have also commenced exports to Italy and Greece. 40 percent of Elbasan's production is currently exported to the abovementioned markets, with which the Elbasan mill has a convenient transport infrastructure.
- What is the total demand for steel in Albania? Are you able to satisfy all of Albania's demand for steel with your capacity?
Dr. Zeki Kaya: The Albanian market's capacity is about 350,000 mt of steel per year. Elbasan Steelworks is able to cover all the country's needs in steel with just 60 percent of its production.
- Which products are most in demand?
Dr. Zeki Kaya: As is the case with many other ex-communist countries, due to the large infrastructure investments financed by the EU, due to the increase in housing loans from the banks, the demolition of old types of houses constructed during the era of Enver Hoxha's regime, the considerable flow of remittances going into housing which is still considered a profitable alternative investment area, due to all these factors Albania is currently experiencing a construction boom, As a result, the products most in demand in Albania are those required for construction purposes.
- The US financial crisis (the so-called mortgage crisis) has negatively affected the construction activities and, therefore, the demand for steel, in Europe. How has this crisis affected the local Albanian market?
Mr. Rifat Esen: Taking into account the special circumstances of the country, I think Albania will not be severely affected by the crisis.
- Could you tell us about the investment plans for your Albania-based steel producing facility?
Mr. Rifat Esen: In 2007, we undertook a €26 million investment program aimed at modernization of our facility. €10 million was financed by DEG Invest for a total of eight years with a two-year grace period, €8 million was financed by Raiffeisen Bank Albania for a total of six years with an 18-month grace period, while the remaining €8 million was financed with equities. Furthermore on June 18 this year, we signed a €20 million loan agreement with the Black Sea Trade and Development Bank (BSTDB) to finance our Albania-based facility in Elbasan, also called Kurum International, with a three-year working capital. Through these long-term financial investments, we are so happy to make a positive contribution to the international financial credibility of the country.
During the modernization works, Kurum International plans to update its existing finished steel rolling production capacity, including rebar, structural steel, wire rod and mesh wire, which will up its existing annual steel rolling capacity to 600,000 mt by the end of the current year. Kurum International plans to sell half of its finished steel production to the Albanian domestic market, while the other half will be exported to neighboring states, such as Kosovo, Macedonia, Serbia and others.
- With new capacities in place, do you plan to expand your sales to markets outside the Balkans?
Dr. Zeki Kaya: Yes, we have already started to supply to southern European markets, such as Italy and also Greece. We are engaged in ongoing meetings with Spanish business circles to supply their market as well.
- Following the completion of the capacity expansion project at Elbasan Steel Works, will you have a surplus of billets which you might then sell to the external market?
Dr. Zeki Kaya: We have structured our production expansion project in such a way so as to balance the production of semis and longs products.
- Elbasan Steel Works currently operates an EAF, so it requires scrap as a raw material. Do you have your own raw material base? From which counties/regions do you source your scrap?
Dr. Zeki Kaya: Yes, we are currently completely dependent on scrap in our production. We source our scrap from the Albanian domestic market as well as from Kosovo and other countries
-Do you currently experience problems in sourcing available scrap?
Dr. Zeki Kaya: With the high global and regional demand for scrap, definitely, problems are experienced. However, we have established our own system for efficient procurement of scrap.
- With your capacity expansion project, Elbasan will require more scrap for its operations. Taking into account the current international scrap market situation, where the main scrap exporting countries are trying to keep their scrap at home in order to satisfy domestic steel production and thereby resulting in limited amounts available for export, how do you plan to satisfy Elbasan's needs in scrap?
Dr. Zeki Kaya: Currently, we are planning to set up our own scrap yards in the regions from which we are sourcing scrap. So far we are planning two scrap facilities in different parts of the Balkan market in addition to one in North Africa. With these facilities put into operation, we will be able to guarantee supplies of scrap to our facility in Elbasan.
-Will these facilities' capacities be enough for you to satisfy your plans to increase Elbasan's production? Or would you be considering a switch to an alternative raw material?
Dr. Zeki Kaya: These facilities will be sufficient for some time. In the meantime, we are also studying if the blast furnaces we have could be reactivated.
-So you are planning to switch to iron ore? From which countries are you planning to source this raw material?
Dr. Zeki Kaya: Currently, we are carrying out a feasibility study to determine the rationality of the blast furnace operation with the existing mine under our administration. It is too early to make a comment on this matter.
- Last year Kurum announced its plans to build a new mini-mill in southern Russia. At first the proposed mill was supposed to be located in the Rostov region, and then the location was reportedly changed to the Republic of Adygea? Could you tell us about the latest developments on the issue?
Mr. Rifat Esen: We decided to cancel this project owing to changes in the Russian and international markets.
- Could you give further details?
Mr. Rifat Esen: After we announced the projects, we had second thoughts about it. Following a second check of the market capacity (taking into account the new investment projects announced by domestic companies in the region), we decided not to go through with it, as very soon the market will be oversaturated with similar products. The creation of excess production capacity could have a negative impact on all market players. This could end up being a lose-lose game. In addition, we faced several permit problems.
-Do you plan any investments in other projects?
Mr. Rifat Esen: Now we are looking into the possibility of buying a steel producing facility in the Caucasian Region. I cannot disclose the details of the project as it is in its very early stages. We are just conducting feasibility studies on these markets.
- Kurum Holding, not only has a steel producing facility in Albania, but also has its own port. Could you speak briefly about this?
Dr. Zeki Kaya: This is not a port facility. Put it this way, our presence at the Port of Durres is of two kinds. One involves the shipyard which we own and operate as a ship repair and maintenance facility. The other concerns a dedicated berth on the eastern quay of the port which currently has the biggest draught size in the port. This is going to be converted into a scrap terminal for us. It is rather a facility within the port. This is the right way of expressing it.
- Do you plan any investment for the expansion of this scrap terminal port facility?
Dr. Zeki Kaya: Yes, as our steel production capacity increases as a result of our investment program, we will need to extend the port loading/unloading capacity as more and more scrap will enter via the port and as more steel products will be shipped from it. In 2010, scrap demand will reach 800,000 mt a year in line with growing production. This will create a problem with the port handling capacity, which we plan to resolve by investing in new infrastructure at the autonomous scrap terminal within the port, including a special quay and also extended railway facilities.