The Turkish steel industry, which has 24 electric arc steel plants, has made another big move! Erdemir acquires Kümaş

Focus on:

·Kümaş, a leading company in magnesium and refractory materials, was acquired

·Kümaş joins Almatis and belongs to OYAK Group

·As end users have requirements for supply security, the vertical integration strategy begins

·The purchase price of 340 million US dollars

Turkey’s Kümaş Manyezit Sanayi A.Ş. (Kümaş), one of the world’s major magnesia producers, was acquired by Turkish steel leader Ereğli Demir ve Çelik Fabrikaları T.A.Ş. (Erdemir) for US$340 million.

The equity conversion agreement was officially signed on January 4, 2021. The current share ratio is

Erdemir’s owner Gözde Girişim Sermayesi Yatırım Ortaklığı A.Ş. holds 51% and Kümaş’s owner Yıldız Holding A.Ş. holds 49%. The agreement will come into effect after the law is approved.

Erdemir is a member of the metallurgical mining group OYAK, which is also Turkey's largest supplementary occupational pension fund with total assets of approximately US$16 billion and is headquartered in Ankara.

The OYAK Group has a wide-ranging industrial and service portfolio, including its chemical products group (the group acquired Almatis, the world's leading specialty alumina producer in 2015). Almatis and Kümaş are both major material suppliers for the global refractory market.

This advancement also optimizes the group’s market share, strengthens the general ownership trend, and reduces competition among magnesia producers, because they are grouped into a larger group of magnesia refractories and directly face end users group. A similar incident occurred a year ago when Sibelco sold QMAG, a leading manufacturer of magnesium oxide, to Refreshnik, a major German refractory manufacturer.

At present, magnesia suppliers other than China are mainly distributed in Mexico, Brazil, the Netherlands, Ireland, Spain, Greece, Turkey, Austria, Slovakia, Russia, Japan and Australia. The resources emerging in recent years mainly come from Greece, Turkey, Saudi Arabia, Jordan, Serbia and Turkey.

In a statement issued on January 5, 2021, OYAK stated that the acquisition is mainly aimed at achieving cost control and efficiency by ensuring the vertical integration of its activities in the steel and cement industries. It is also to protect the value of national resources. There is no doubt that the synergy after integration will increase.

On August 11, 2020, OYAK Group also integrated and acquired 60% of the shares of Haznedar Durer refractories from Imerys, a global industrial mineral producer that was headquartered in Paris.

As we all know, RHI Magnesita (RHIM), a global manufacturer of magnesium and refractories based in Vienna, has established a magnesium oxide plant (MAS, Eskişehir) in Turkey. In the past two and a half years, Kümaş has been closely monitored, and he participated in the acquisition in May last year, but it was not successful.

Kümaş’s main mineral products include heavy burnt magnesia (annual production of 300,000 tons); fused magnesia (annual production of 40,000Tons); light burned magnesia (annual production of 100,000 tons) and heavy burned dolomite (annual production of 20,000 tons). Refractory materials

It mainly produces refractory bricks and mortar based on magnesium, dolomite and alumina, with an annual output of approximately 150,000 tons. OYAK mainly produces steel products, which require the use of magnesia refractory materials and chemicals.

The steel industry in Turkey is in good condition, including 24 electric arc furnace plants, 7 induction furnace plants and three alkaline gas plants. In 2020, when the epidemic is pandemic, Turkey is also bucking the trend, and steel production is expected to exceed 2019.

Turkey is currently the second largest steel producer in Europe and is expected to surpass Germany in the future. OYAK continues to invest overseas, with the goal of becoming the world's top 5 in the next five years. For the circular economy, the group also has specific plans.

OYAK not only owns the steel and refractory business, but also covers the fields of agriculture, chemistry, cement and paper making.

According to our survey, Kümaş is the largest producer of magnesite products in Turkey. It has a wealth of magnesite and dolomite deposits in Turkey, and is the second largest producer of magnesite after China. In terms of magnesia production, it is second only to China and Russia, ranking third in the world and fourth in export volume.

Figure 1: 2019 global magnesite reserves and production

Figure 2: 2019 global magnesia supply and transactions

It is understood that Kümaş has 163 million tons of magnesite resources, of which high-quality cryptocrystalline magnesite reserves account for about 20% of the world. It is characterized by very fine magnesite crystals, usually 1-10μm, with high surface area and High reactivity. In addition, there are about 96 million tons of dolomite resources.

The other two major magnesite producers in Turkey are Magnesit AŞ and Eskişehir under RHIM, with an annual capacity of 260,000 tons of heavy burned magnesia, and Konya Selçuklu Krom Magnezit Tuğla Sanayii AŞ, Konya, with an annual capacity of 45,000 tons of heavy burned magnesia. .