ÇolakoğluMetalürji, one ofTurkey's major steel producers with an annual crude steelproductioncapacity reaching three million metric tons, has decided to establish a presence on the ground in theUSby founding a new wholly-owned subsidiary called Medtrade Inc. in Houston, Texas.ÇolakoğluMetalürji has for years been an importer ofscrapfrom theUS, while also exporting finished steel products, includingrebarand hot rolled coil, to the country.
Two vice presidents ofÇolakoğluMetalürji are together in charge of the new Houston-based subsidiary. Philip Hoffman, vice president of ferrousscraptrading, is responsible for sourcingscrapfrom theUSto be shipped toÇolakoğluMetalürji, while José Gasca, vice president of marketing for finished steel products, is in charge of marketing and sellingÇolakoğluMetalürji's finished steel products for distribution throughoutNorth America.
Uğur Dalbeler, CEO ofÇolakoğluMetalurji, answered SteelOrbis' questions regarding Medtrade.
We have seen some reports saying thatÇolakoğluMetalürji has opened a sales office in Houston, Texas. What information can you giveusabout this new office?
Yes, we have opened an office in Houston. But it seemed a little odd to me, all this uproar about our new office. We were the first Turkish company to open an office in China, back in 1987. In addition to our office in China, we also had offices in Tehran and Moscow. Besides, we had an independent trading company for many years, under the name of Fercom Trading. However, none of these resulted in such a hullabaloo. Many Turkish steel companies have offices abroad. Ekinciler Demir ve Çelik is a good example. Trading firms also have foreign offices.
We want a presence in theUSfor the following reasons. We supply some of our raw material needs from theUSand we have a certain amount of exports to theUS. So theUSis an important market for our activities. That's why we decided to open an office in theUS, a market from which we have supplied our raw material needs for the past 30 years and to which we have been selling products for the past 25 years. Our aim is to be present within the same time zone 24 hours a day, to have a chance to better evaluate what we can do there and, most important of all, to be able to take our decisions on a healthier basis by reaching more accurate information in a shorter time. As you buy yourscrapfrom certainscrapsuppliers in theUSand sell your products through certain trading companies, then you have to decide your moves according to the information exchanged with these firms. However, theUSmarket has its own dynamics. For finished steel, domestic and import prices vary and the same is also true for localscrapprices andscrapexport prices. In this context, the importance of timing is evident, especially in such volatile market conditions. Consequently, we are aiming to attain a healthier information flow with our new office in Houston. In the future, we may also consider some further activities.
Let me also say that this office is not only focusing on theUSmarket, but also on all North, Central and South America, along with the Caribbean region. José Gasca is in the marketing side of the new office. Previously, he was managing director of flat steel business at Coutinho & Ferrostaal. With José, we also believe that we will have a more effective information flow also from the south of theUS, as he knows the region quite well and we believe that he will provide accurate orientation forus.
We may certainly consider the possibilities of opening new offices elsewhere in the future.
Do you think that the reason for that "uproar" may be because people believe that you will obtainscrapat better prices from local suppliers, instead of from international suppliers?
Yes, that may be the reason. Lately, some international trading companies have been getting more involved in thescrap贸易。他们的位置在正确的时间and the cost of that tousis higher prices, since these companies buyscrapwhen the market is at the bottom, resulting in tighter supplies - which is speculation, obviously - and then they are selling again when the market peaks up. With our new office in Houston, we are hoping to remain at a distance from those who are speculating in the market, even if we will still continue to supply our needs throughUSsuppliers.
The Turkish Ministry of Economy was considering providing incentives for companies which invest abroad in raw material supplies. Have these incentives come on stream and, if so, have you received any such incentive?
到目前为止,我还没有听说过任何实际项目制作h received such an incentive. We have certainly heard and read about the plans of the ministry regarding these kinds of incentives. However, we do not have any concrete information nor have we heard of any example of these incentive procedures up to now. As a result, we are not sure if it is necessary to open ascrapyard abroad or to run a mine to be qualified. In brief, we have not received any such incentive.
With your new office in Houston, will you also contact end-users in theUSfrom now on?
不。如果我试着达到铜的客户stomer, then I would have to compete with my own customer, which is something to be avoided. The same can be said also inTurkey. There are certain steps which should be followed when doing business. We are in no way going to cut out a steel service center and to reach its customers ourselves. Our scale is different and we will do our business the same way in theUS. But at least, we will be monitoring domestic prices in theUSmore closely with our new office there and maybe we will now be able to reach some customers that we had difficulties in reaching before.
Will you run a warehouse in theUS? Or will you hold inventories there?
In the short term, we are not planning to run a warehouse. About holding inventories in theUS, we will decide that later, depending on the performance of our office. Initially, we do not have such a plan. However, if we see that it is possible to do so, then we may well decide to hold inventories in theUSin the future.
"The idea of setting up aUScompany was about two years in the making"
In addition, Philip Hoffman also spoke to SteelOrbis about the foundation of Medtrade and the vision of the company for theUSmarket.
Philip Hoffman began his career at Luntz Corp before it was bought by PSC Metals and then worked for Hugo Neu in New York and Los Angeles, before they were bought by Sims Metal Management in the early 2000s. For 10 years, he has worked in the field ofscrapbuying and vessel chartering and international trade. After receiving a degree in International Trade and Maritime Law, he proceeded to tradescrapfrom theUSWest Coast to the Far East.
Mr. Hoffman met Uğur Dalbeler at a conference, where both were speaking when Hoffman asked whyÇolakoğluMetalürji did not import containers intoTurkeygiven the close proximity of a container port to the mill. While the idea of container shipments was ruled out due to container freight rates, the two began talking about sourcingscrapfor bulk loading.
Hoffman always had the vision that it made logical sense for an overseas mill to vertically integrate given the direct dependence on raw material. The idea of setting up aUScompany was about two years in the making. About 1-1.5 years ago, Hoffman proposed the idea to Dalbeler following feasibility studies in theUSabout the best possible location to set up the new trading hub. The Gulf Coast was found to be the most economically viable.The company on Hoffman's side would sourcescrapfrom dealers to be exported directly toÇolakoğluMetalürji, while José Gasca would facilitate the import of finished steel fromÇolakoğluMetalürji into theUS.Çolakoğluwas already a major exporter of finished steel to theUSprior to theUSsubsidiary company being set up and was also a major buyer ofscrapfrom exporters out of the east coast.
"Medtrade is ramping up its operations slowly so as not to disturb currentscrapmarket dynamics in theUS"
So far, Medtrade has done some business, but it is ramping up its operations slowly so as not to disturb currentscrapmarket dynamics in the United States, according to Hoffman. The volumes Medtrade will be handling will pale in comparison to the otherscrapbehemoths. Even with Medtrade now established - although the company is still only at its beginning -ÇolakoğluMetalürji will continue to deal with its usualscrapbrokers for their normalscrapexport cargos.
Hoffman is uncertain as to whether this will prompt other Turkish mills to do something similar, asÇolakoğluMetalürji is a unique mill in a unique situation -in part becauseÇolakoğluMetalürji has its own vessels, there is a significant freight advantage and so this move was the next logical step for the company.