Turkish cement sales seen rising rapidly in 2006

Turkish cement sales seen rising rapidly in 2006
Published: 23 June 2006

A construction slowdown as a result of rising interest rates will trim Turkey’s cement sector’s turnover, but domestic sales will still grow 20 per cent, the head of Oyak Cement and Automotive told Reuters. Sales in Turkey’s cement grew 15.7 per cent in 2005 to a record 35Mt, spurred by a house building boom. That had followed years of decline after a major earthquake in 1999 and a deep financial crisis in 2001.

Inflation of 10 per cent in May and a 20 percent slide in the lira since the end of April have pushed up borrowing costs. The central bank raised benchmark rates 175 points to 15.00 per cent earlier this month.

Celalettin Caglar, head of market leader Oyak Cement and Automotive Group, which owns several cement firms, said market turbulence had led the company to revise down its forecasts for this year. "I forecast that in 2006 cement sales will rise 20 per cent to 42Mt. That forecast is after a five per cent downwards revision in light of the latest market developments," he told Reuters in an interview on Thursday.

Sector sales grew 18 percent in the first three months of the year, traditionally slow months because of winter conditions. "A rise in rates and slowdown in building will be balanced by seasonal effects and non-housing investment," he said.

Exports to the sector’s traditional market in northern Iraq are falling and are expected to continue to do so, and that coupled with weaker internal demand will force the sector to increase exports outside of the region.

"If the slowdown in housing investment continues as it is at the moment, in order to get rid of the sector’s extra capacity exports are going to have to rise," he said, adding that Oyak’s factories would work at full capacity this year.

Caglar said he expected the Turkish economy to grow 3 to 4 per cent this year, weaker than a government forecast of six per cent and just below a forecast from a recent Reuters poll.

Oyak -- the army pension fund with a range of businesses from financial services to steel - is one of the leading cement groups in Turkey, owning Adana Cimento , Bolu Cimento , Unye Cimento , Mardin Cimento, Elazig-Altinova Cimento and Bircim Cimento. It also owns Oysa Cimento in partnership with Sabanci Holding.