Interview With Görkem Kavcak, YILMADEN Holding

YILDIRIM Group was established in 1963 as a modest trading company in Türkiye. We have grown into a global industrial group through entrepreneurial spirit and innovation. We began our international trading in 1993, and today, we operate in nine sectors across 56 countries, employing over 25,000 people globally. YILDIRIM’s subsidiary, YILMADEN Holding, is significant to this success. Established in 2014, YILMADEN focuses on metals and mining, extracting valuable minerals such as chromite in three countries and processing them in eight countries.

We have been active in the metals and mining sector since 2004, operating in eight countries. We have chrome ore mining operations in Türkiye, Kazakhstan and Albania and are the world’s second-largest high-quality, high-carbon ferrochrome producer. We are proud to be the only company producing high-carbon ferrochrome in four countries. We also have operations in Kosovo, where we have integrated ferronickel production, ferrovanadium production in the US and acquired American Chrome & Chemicals in the US, our first foray into the chrome chemicals business.

YILMADEN’s sustainability approach comes from YILDIRIM values and aims to be the industry leader in sustainable mining and metal approach. We integrate sustainability into our processes, starting from YILMADEN strategies, following decision-making processes, and the daily routine. We prioritise the values that drive our sustainability efforts, focusing on employee safety, environmental management, human and community rights, regional development, ecosystem management, climate change, and a responsible supply chain.

There has been a clear landscape in the chrome ore and ferrochrome world since the pandemic, notably regarding the price gap between the European/American and Chinese markets. While this price differential, which has been growing steadily post-pandemic, has somewhat narrowed recently, it persists. Several factors have contributed to this situation, underscoring two separate ferrochrome market dynamics. In this regard, we can observe that China’s market structure has evolved to a significantly different point. On the other hand, the European/American markets have become more fragile regarding raw material sourcing, leading to significant price movements during the pandemic.

Another issue is the trajectory of chrome ore prices. The upward price trend, which began during the pandemic, remains firm. China’s increasing demand is undoubtedly the primary factor, along with the entry of Indonesia into the market and the momentum of India, all of which are significant in chrome ore pricing.

Indeed, developments in South Africa, one of the key players in the chrome market, are of paramount importance. Energy-supply-related issues and the failure to find a permanent solution to these problems could fundamentally impact the market’s supply side. Compensating for the decrease in ferrochrome production in South Africa in the long term may prove challenging. Despite China’s idle capacity, factors like energy costs suggest that compensating for production may not be as straightforward.

Our approach has consistently followed a top-down approach. At the apex, the Purchasing Managers’ Index (PMI) is one of the principal leading indicators, offering insight into forthcoming market sentiment.

On the foundation, assessing end-user demand across various sectors—such as automotive and consumer goods—holds chief importance.

Additionally, diligent monitoring of global stainless-steel production trends remains integral to our strategic analysis, mainly focusing on key regions, including Europe, China, Indonesia, and India.

Undoubtedly, the future of the chrome sector is directly related to stainless steel production and demand. Long-term stainless-steel consumption will remain strong, mainly fuelled by the momentum created by countries like China and India. In parallel, the acceleration seen in value-added stainless-steel production further emphasises the importance of quality parameters in chrome ore and ferrochrome.

Markets like Europe and America will continue to be the centres of value-added production. In these markets, balanced growth rates are more critical than high growth rates. We anticipate the slowdown caused by the war will gradually give way to recovery. This could create a wave of demand, although this situation will become more apparent.

On the supply side, China is a significant player, but its lack of chrome ore will continue to make it dependent on imports in the coming period. There hasn’t been a considerable capacity increase regarding ferrochrome outside China for over a decade. This is important for effectively absorbing demand. Given the lack of expectations for large-scale new capacity increases and the vitality of demand, we can foresee that the market will maintain its dynamism in the coming period.

Since the beginning of the war, the weak demand has been the biggest headache. It has been a long time, but the indicators we follow do not signal a reversal.

On the supply side, the industry has been under global competitive pressure from different countries and needed help finding a strategic solution rather than trade protection. This may be the most critical and decisive factor for the industry.

There are two essential aspects: volume growth rate is maturing and converging to developed countries. However, that does not mean the growth story ended; it only changes the stage to a more stable platform. The other aspect is the changing structure, in which China has increased its added-value production capabilities. This means China will require high-quality resources. This will undoubtedly reshape the supply and demand conditions for raw materials.

As you said, nickel exhibited considerable weakness throughout 2023, primarily due to a surplus in supply originating from Indonesia. Over recent years, Indonesia has significantly expanded its production capacities, leading to an imbalance between supply and demand.

Presently, demand needs more readiness to absorb the elevated supply levels. Nonetheless, market dynamics are inherently cyclical, and there are indications that the market may be approaching a trough. However, it is essential to note that this does not necessarily signify an imminent upswing in the market but suggests that the worst may have passed.

Furthermore, the demand landscape within the electric vehicle (EV) sector is evolving, with the roles of critical commodities such as lithium, cobalt, and others becoming increasingly defined. Nickel is poised to play a pivotal role in this transition, with demand expected to align accordingly. While supply-related challenges pose significant obstacles for the industry, the long-term outlook for nickel remains robust, bolstered by emerging demand drivers.

Hence, it is noteworthy that many original equipment manufacturers (OEMs) have proactively secured nickel supplies, underscoring confidence in the market’s future trajectory.

It is always a critical element in our decision-making processes. It is a clear fact that data is a requirement, but meaningful analytics is also a necessity. Analytical decisions are indispensable in every stage of our operations, from data collection to post-data analysis, from sales and marketing strategies to risk management.

You cannot prevent earthquakes, hurricanes, or pandemics, but you can measure and manage your risks and adapt accordingly using technology.

We had a series of significant earthquakes in Türkiye in 2023, but we managed the supply chain disruptions by utilising different mechanisms from logistical operations to stock management.

It is fundamental for commodity producers to have stress tests and scenario analyses to adapt to potential disruptions using technological advancements.

Artificial Intelligence (AI) is a new chapter, and we have been working on how to adapt it to our operations. Supply chain disruptions are an area to focus on by using AI.