Iskenderun mills suspend contracts amid force majeure conditions

At least four mills in the Iskenderun area, a major steel production hub across which output remains halted following the earthquake on 6 February, have declared force majeure.

In a letter sent to business partners, the mills say the state of emergency called by presidential decree and enacted by parliament last week has seen a force majeure enter into force legally. In cases not specified in contracts, force majeure arising from natural disasters specified in the laws is still valid, the letter points out.

“The contracts between our parties have been suspended for an indefinite period of time due to force majeure caused by natural disasters. We hereby notify you that you will be informed as soon as possible in case of any improvement in the current situation,” the mills state in the letter seen by Kallanish.

A source at one of the mills in question clarifies that contracts have been temporarily suspended and that this is not a final force majeure declaration which terminates contracts.

Although no mill has declared significant damage to production facilities, workforce shortages remain the main problem hindering production.

A southern Turkish steel mill source says: “The current situation may last for another 15 days or a month. At least four steel mills have sent these letters to their business partners. Customs are closed in the region and it is not possible to run operations at ports. Even if you discharge scrap in ports, its relocation is subject to a state of emergency permit which I believe would not be granted. Let’s say permission is granted, but then there is no one to carry out work. We lost some of our colleagues, and most of them have lost families, relatives and 70% of them their homes.”

On the other hand, almost all mills have opened their facilities as shelter for affected people, and sent some of their equipment, like cranes, to aid rescue efforts.

Some small scrap vessels are heard being redirected to other destinations, while some large vessels are still anchored at sea, off the coast of Iskenderun. One large mill, however, is heard to have started running its operations at its own port. Some southern mills are trying to redirect scrap vessels to sister mills in other regions.

The immediate impact of the earthquake will be a significant fall in Turkish steel production in February after the January recovery. However, in the longer run, an increase in domestic steel consumption is expected due to the reconstruction of the destroyed cities. Fears are also growing over a potential earthquake exceeding 7 on the Richter scale occurring in the Marmara region. This would also require substantial reconstruction activity.

With the removal of debris in earthquake-affected areas, domestic scrap supply is expected to increase as well.

Burcak Alpman Turkey