Turkey now takes the lead in Europe

To begin with, Turkey is well forested. The total area of Turkey is 78 million hectares and 28.6% of this consists of forest areas, which are heavily concentrated in our mountainous regions.

Most of this belongs to the state and is governed by the General Directorate of Forestry. Less than 1% of the forests is in private ownership.

Forested land has also been expanding. At the end of 2015, it was 22.3 million hectares. There has been an increase of 2.1 million hectares since the last survey in 1973. The Turkish Forest Inventory was calculated to be 1.6 billion m3 in 2015 – again an increase, of 700 million m3 in just over 40 years. The annual increment of the Turkish Forest Inventory was calculated to be 45.9 million m3 in year 2015. Major tree types are pine with 56%, oak with 24%, followed by beech with 9%.

The General Directorate of Forestry produces 20 million m3 of industrial wood while the private sector produces five million m 3 and another five million m3 is imported.

The Turkish wood based panel industry consumes roughly 13 million tons/year of wood as raw material. Out of this quantity about 2.5 million tons is imported. These statistics come from Turkstat, the government bureau of statistics. The US is the number one exporter of softwood chips to Turkey, followed by Canada. Hardwood chips are mostly imported from Ukraine and Latvia.

MDF is particularly strong here. Heavy investment in new MDF and particleboard plants by industry leaders has raised Turkey’s position in the world producer rankings during the past three years as domestic housing construction and growing exports continue to boost overall demand for wood panels.

According to Turkish wood panel industry capacity figures, the country has recently overtaken Germany to become Europe’s largest MDF producer, and is now the world’s second largest MDF producer after China.

Turkey is now the third largest producer of particleboard in Europe after Russia and Germany, and it is ranked number five in the world after China, the US , Russia and Germany. In laminate flooring, Turkey is also in the top three, being ranked second in Europe after Germany, and third in the world after Germany and China.

Turkey’s MDF/HDF production capacity as of the end of 2016 is 6.8 million m3/year. Particleboard capacity is 5.1 million m3/year, OSB 240,000 m3/year and plywood 200,000 m3/year. Realised production, as opposed to capacity, is as in Table 1.

Both exports and the domestic market are buoyant. About 500,000m3 of MDF is exported, corresponding to about 13% of total production. The primary export market is Iran, followed by Iraq.

As a result of Turkey's strategic geographic location, its domestic wood based panel industry has access to a market of 1.5 billion people in the Middle East, North Africa, the CIS and Europe. That is one of the factors that has helped Turkey's wood based panel sector post an average annual growth rate of around 8% over the last decade.

There has been a consistent rise in housebuilding in Turkey over the years due to the development of the construction sector, the establishment of the mortgage system, and ongoing urban transformation. Naturally, the rise in the number of dwellings translates into higher demand for furniture.

Almost 600,000 new homes are built every year and another 600,000 are sold secondhand. It is also government policy to rebuild old housing units to be earthquakesafe.

Turkey’s young, growing population of 78 million people is driving the nation’s residential housing construction boom, which is playing a major role in lifting domestic demand for MDF, particleboard and other construction and interior furnishing materials. Turkey has the youngest population in Europe, with the average age being 31.

There are about 500,000 people getting married each year. There are many new office buildings and shopping malls, driving demand.

Turkey is also a big tourist destination. Almost 30 million tourists come here each year, so there are many hotels. They change their furniture almost every five years, so that’s a big market as well.

The history of panel production in Turkey is not much more than 30 years old. The first fibreboard factory was established by Çamsan Agac Sanayii in 1985 in the Black Sea town of Ordu. Production capacity and the number of factories increased gradually through the 1990’s. Wood based panels manufacture in Turkey is almost entirely by privately owned Turkish companies; they are not listed on the stock exchange.

Kastamonu Entegre, one of the two big multinational groups of Hayat Holdings, was established in Istanbul in 1969 to produce in the wood based panel sector. The company started production with a particleboard factory in Kastamonu city in 1971.

It had very rapid growth in its early years and no fewer than six new factories opened in five years. Kastamonu Entegre has achieved a growth that is well above the average over the past ten years; it has changed its global rankings accordingly. The distinction in brand and product created by the company in the sector is a major factor behind its sustainable growth and success.

Today, Kastamonu Entegre is producing raw and melamine coated MDF and particleboard, laminate flooring, fire resistant MDF and particleboard, moisture resistant MDF and particleboard, painted panels, honeycomb filled decorative panels, glossy panels, worktops, door panels and products for the furniture, decoration and construction sectors.

The company has one of the biggest capacities of panel plants in the world.

Given such world-standard capacity our group has set a target to spread all over the world. Our growth strategy is to be close to the market and close to raw material resources. We are investing in new markets and new raw material resources to ensure sustainable growth.

Kastamonu ranks as the seventh largest panel producer in the world, but this is primarily because we do not produce OSB. We are among the top four in each product group that we are involved in, such as MDF, particleboard, laminate flooring and doorskin. Our annual production capacities are in Table 2.

Today we have 16 factories spread over 11 locations in six countries. We have 5,500 employees and a turnover of €1bn, of which 40% is realised outside Turkey, which is our main market. We export to more than 90 countries worldwide.

As the company reached a certain market share in Turkey, in order to maintain sustainable growth in 1998 the first investment abroad was decided upon, with the aim of becoming a regional leader.

Communism in the Eastern Block had recently collapsed. The Prolemn company, in the Reghin region, was acquired from the Privatisation Administration of Romania.

Kastamonu invested €100m and installed the third-largest doorskin production facility in the world, with a capacity of 19.5 million pieces a year.

The 'Dorpan' brand doorskin produced in Romania is now exported to more than 40 countries. In 2012 a particleboard line with an investment value of €130m started up in there.

Its capacity is 560,000m3/year; 55 % of its production is exported to Balkan countries. In 2014 a worktop production line with an annual capacity of 200,000 pieces began production.

In year 2000 we acquired the Gabrovnitsa factory in the Kazanlik region of Bulgaria and installed a particleboard facility with a capacity of 220,000m3/year at an investment cost of €30m. Pellet production was recently started in this location as well. Particleboard production in Bulgaria is 50% for export and ships to more than 40 countries, including the Balkans and Europe.

We are also involved in making Kraft paper and corrugated board from recycled paper. Our most recent investment abroad is the MDF plant in Tatarstan. It has one of the largest MDF production capacities, at one million m³/year, and a laminate flooring capacity of 35 million m²/year; the total investment was €400m.

Investments by the company over the last seven years have increased its production capacity by 2.6 million m3/year. There is, in Turkey, the Gebze particleboard factory with a capacity of 560,000m3/year and the Adana MDF factory (465,000m3/year); the Alabuga plant in Tatarstan, Russia, has two lines and a capacity of one million m3/year between them; and in Romania, our particleboard factory can produce 560,000m3/year.

As far as new products go, Kastamonu is the first company in the world to produce a high-gloss product at 2.1m width using UV lacquering and hot melt coating technology on melamine faced MDF and particleboard; this has created a market with no rivals.

Latest technology ‘Technotop’ and ‘Neotop’ brand laminate worktops came to the market in 2014. ‘Urban’ and ‘Boutique’ flooring ranges have been noted for their decors; and the ‘Reflection’ range comes in five different surfaces (Veneer, Stone, Paint, Golf and Geometric) of melamine faced products for the furniture sector.

Environmentally-friendly and sustainable approaches are essential conditions of Kastamonu’s investment and growth. To this end, we consistently try to boost productivity and grow by consuming fewer of the earth’s resources and generating less waste.

Our 136 diesel-fueled forklifts have been replaced with electric forklifts, to raise energy efficiency and reduce carbon emissions. We have nine co-generation turbines operating with natural gas and solar panels on the roof of our Adana factory produce one MW of electricity.

We recover and treat 60,000m3 of waste water yearly. It has been calculated that 3.1 million tons of carbon are stored in our products, equivalent to carbon emmissions of 550,000 households.

Turning to our recent investments, during Q1, 2017, Kastamonu Entegre acquired the main production lines from two decommissioned particleboard plants in France and Italy. This will add a capacity of roughly one million m3/year to the total production capacity of the company.

The Turkish economy is passing quite successfully through a rather critical period which has been remarkably difficult to manage. The Turkish wood panel sector, which is characterised by high added-value, closed 2016 with a 10% shrinkage in consequence of recent developments.

We strongly believe that by continuing to invest at the same speed, and with normalisation of economic and political circumstances, the sector will continue to display the same successful growth performance that it achieved in earlier years.

In 2017 we expect the sector to grow by 10%, to reach once again its old level. The number of construction permits issued in 2016 increased by almost 10% over the previous year, which is an encouraging sign that 2017 should do better from the panel sector’s point of view.

The relationship between Turkey and our Russian neighbour has been much in the news in recent months. Revival of the social, cultural, economic and friendship relations with the Russian Federation which existed until recently would be good for both communities.

From the day when problems first arose in bilateral relations, we have been insistently emphasising that our investments were not short-term and opportunistic but were long-term and based on mutual benefit and cooperation. We are glad that Turkish-Russian relations are being constructively directed towards finding the right solutions without aggravating the problems.

Despite the economic crisis in Russia, in April 2015 we started our investment of €130m in the second MDF line, and we continued with this even after the crisis which began immediately after, and in April 2016 we commissioned the line.

We did so because we believed that Russian- Turkish relations will return to normal. The project’s target is a 25% share of the Russian market. Some 2,500 people gain employment from it, of whom 500 are directly employed, and we will go on with our innovation and investments, continuing to be one of the most powerful Turkish companies active in Russia.

This year our MDF plant was named 'Best Project for Reducing Imports' by the Russian Federation of Industrialists and Entrepreneurs.

The award ceremony was attended by Russian president Vladimir Putin, members of the Russian government and Russia's leading businessmen. Speaking at the opening session of the Congress, President Putin said: "We appreciate the business world's initiatives for common goals that contribute to the development of Russia”.

Kastamonu of course is not the only Turkish company with panel interests. Two new MDF lines started up in Turkey in 2016 – Çamsan Entegre’s, with a capacity of 360,000m3/year and Starwood’s with a capacity 400,000m3/ year. Another new line will start this year, from the SFC company with a capacity of 300,000m3/ year. Yildiz Entegre, headquartered in Koaceli, is planning to build two new MDF/HDF mills outside Turkey, one in Pitesti, Romania and one in Vladimir, Russia.

To sum up, Turkey is one of the key players in the global wood based panel industry and trade. China is the first in producers’ ranking, the US and Canada follow and Turkey is fourth.

In laminate flooring, China and Germany currently share most of the market evenly and Turkey is third with a 10% share. Kastamonu has a 6% share within the global total.

In the long run, the market diversification strategy of Kastamonu Entegre will be based on sustainable growth with consideration for proximity to clients and to raw materials.

These investment objectives will transform Kastamonu from a Turkey-focused production entity to an international organisation running its production activities over a more expanded geographical area. The target is to become one of the five largest producers globally and to bring Kastamonu Entegre quality to the whole world, from America to China.