NILUFER, Turkey ― Last October, in the midst of a robust economic upturn, POSCO opened facilities in Turkey to process steel sheets in a bid to hitch a ride on an unparalleled boom in the country’s automotive market.

Almost a year on, the steelmaker’s Turkey Nilufer Processing Center is witnessing a surge in demand from global carmakers such as Renault SA and Hyundai Motor Co. and other parts manufacturers.

“A bigger market means more opportunities for us,” said Kim Cheol-min, managing director of the processing center.

Located some 260 kilometers southwest of Istanbul, the region has emerged as a focal point for Turkey’s auto industry in recent years, housing more than 200 carmakers and their suppliers from around the world.

After a tough initial period following the launch, POSCO-TNPC moved into the black in the second quarter of the year. The facility is capable of transforming 170,000 metric tons of steel into cutting-edge plates per year, the company said.

“We had difficulties earlier in penetrating the local market due to the steel industry’s exclusionary environment toward foreign firms, and carmakers’ pursuit of consistency in steel quality for the same model,” a POSCO official said.

“But our marketing strategies that prioritize customers helped us through that time. We’ll continue to boost sales, profitability and price competitiveness by developing more partners and new business opportunities including toll manufacturing.”

POSCO-TNPC aims to supply 43,000 metric tons of steel sheets to its customers this year and about 110,000 tons in 2014. Sales are projected to reach $36.8 million by the end of the year and $82.5 million in 2014.

Emerging unscathed from a global economic meltdown, Turkey’s auto sector is enjoying brisk growth with car sales up about 10 percent last year from a year before.

Although policymakers are still grappling with rising inflation, the EU candidate country’s appreciating currency, improving political stability and banking systems combined to boost domestic consumption and corporate investment.

The economy overall expanded 8.9 percent last year and again 8.8 percent in the second quarter, government statistics showed.

Car sales are forecast to hit 1 million units this year, which the government wants to double by 2020.

With about three-quarter of households not behind the wheel, the Turkish car industry has a strong long-term potential, according to Deloitte.

“Automobile ownership in Turkey rose rapidly between 2003 and 2009 with an average annual growth rate of 7.1 percent,” the accounting and consulting firm said in a report. “The growth has been achieved despite a substantial tax burden.”

Turkey levies a special consumption tax on domestic and imported vehicles, which is about 60 percent for cars with engine capacities of up to 1,600 and more than 100 percent for those with 2,000 or bigger. Petrol taxes are also high there, sending retail prices beyond 3,000 won ($2.50) per liter in some areas.

Kim stressed Turkey as the “bridge connecting Europe and Asia,” saying POSCO is “now only beginning to build a keystone to the European market.”

More than 70 percent of vehicles and parts produced in Turkey are currently exported to Europe, Deloitte data showed. The European Union still remains the single largest market for Turkish goods overall, powered by a customs union agreement signed in 1996.

POSCO operates around 50 steel-processing facilities in 14 countries including Japan, China, India, Malaysia and Mexico and plans to raise the number to 115 by 2020, focusing on the premium auto segment.

By Shin Hyon-hee, Korea Herald correspondent
(heeshin@heraldcorp.com)