Turkish Steel Industry 2026: Kardemir Expansion and Erdemir Dividends

Summary

The first half of 2026 marks a strategic turning point for the flagships of Turkish heavy industry, Kardemir and Erdemir. Within the framework of the Turkish steel industry 2026 vision, the commissioning of the new Continuous Casting Machine (SDM-2) by Kardemir (KRDMD) on April 3, 2026, symbolizes the sector's most concrete step toward increasing value-added production capacity. This development is not merely a capacity expansion but also a defense strategy developed against the European Union's (EU) Carbon Border Adjustment Mechanism (CBAM) and the new quota regime. On the Erdemir side, the 3.85 billion TL dividend payment approved at the General Assembly on March 26, 2026, reinforces investor confidence while revealing the difference in capital allocation strategies between the two industry giants. In this analysis, we will cover the 2026-2027 projections of the sector, ranging from Kardemir's technological transformation to Erdemir's financial projections.

Background

Kardemir, Turkey's first heavy industrial factory, commissioned the SDM-2 (Continuous Casting Machine) unit, one of the most critical parts of its production line, on April 3, 2026, coinciding with its 89th anniversary. This investment is part of the modernization move the company initiated in the 2020-2024 period. This new machine, working integrated with the previously completed Second Vacuum Plant and Sizing Block, has brought Kardemir one step closer to its annual liquid steel production capacity target of 3 million tons. The primary motivation for the company to make this investment is to maintain and increase its market share in high-margin products such as rails, wheels, and heavy profiles.

On the other hand, the global trade climate is becoming increasingly difficult for Turkish steel producers. The new protectionist measures to be implemented by the EU in July 2026 carry the risk of a contraction of up to 47% in quota-free volumes for Turkish exporters. This situation forces producers to compete not only on quantity but also on quality and low carbon footprint. Erdemir, in this process, focuses on both green transformation and operational efficiency with an investment budget of $600-650$ million. The dividend decision announced following the 2025 fiscal year results demonstrates Erdemir's cash flow strength, while Kardemir's decision not to distribute dividends by prioritizing investments shows that the two companies are in different growth phases.

Data and Figures

To see the developments in the sector more clearly, the following table summarizes the critical data announced in the first quarter of 2026:

| Parameter | Kardemir (KRDMD) | Erdemir (EREGL) | Sector General (2026 Target) | | :--- | :--- | :--- | :--- | | Critical Development | SDM-2 Commissioning (April 3) | 3.85 Billion TL Dividend Approval | 20 Million Tons Export Target | | Capacity Target | 3 Million Tons/Year Liquid Steel | $600-650 Million Capex Budget | $17 Billion Export Revenue | | Dividend Policy | No Distribution from 2025 Profit | Dec 15, 2026 Payment Deadline | Sectoral Average 3-5% Yield | | Strategic Focus | Value-Added Product Diversity | Green Transformation & Efficiency | EU Quota and CBAM Compliance |

According to Kardemir's KAP (Public Disclosure Platform) - April 3, 2026 disclosure, the SDM-2 investment will increase the company's operational flexibility by 15%. In Erdemir's KAP (Public Disclosure Platform) - March 26, 2026 notification, it was finalized that the 3.85 billion TL cash dividend will be paid by mid-December. The general outlook of the sector, according to SteelOrbis - April 21, 2026 data, shows that the 20 million ton export target is maintained despite the EU's protectionist measures.

Market Impact

The news of Kardemir's capacity expansion created a positive atmosphere in the industrial index of Borsa Istanbul (BIST). Especially in KRDMD shares, the contribution of the investment to long-term profitability has begun to be priced. Although the fact that dividends will not be distributed in the short term caused disappointment for some retail investors, institutional investors welcome the capacity increase and the preservation of the debt structure. With the commissioning of SDM-2, Kardemir's hand is expected to be strengthened in import substitution products (especially automotive and defense industry steels).

On the Erdemir side, the dividend approval supported the formation of a floor price for the stock. The 3.85 billion TL distribution contributes to the liquidity cycle in the market, while the company's investment expenditure (capex) plan of over $600 million indicates that the future growth potential is preserved. However, global increases in energy costs and the EU's carbon tax applications continue to create margin pressure for both giants. Market analysts predict that the stabilization expected in steel prices in the second half of 2026 could shorten the return period of these investments.

What It Means for Investors

For investors, 2026 is a year of choosing between "growth" and "income." Kardemir offers a growth story with its SDM-2 and other technological investments, while Erdemir continues to be an income focus with its regular dividend payments. Kardemir's 3 million ton capacity target will allow the company to benefit more from economies of scale and bring down unit costs. This situation could provide Kardemir with a competitive advantage, especially during periods when global steel prices are suppressed.

For Erdemir investors, the payments to be made until December 15, 2026, are critical for portfolio efficiency. However, investors' eyes should be on the company's steps regarding green steel production. Since the EU's CBAM regulation will penalize carbon-intensive production, how much of Erdemir's $600-650 million investment budget will be allocated to emission reduction will determine the stock performance for 2027 and beyond. The Turkish steel industry in 2026 is using technological superiority as a lever to overcome global protectionist walls.

Frequently Asked Questions

Why did Kardemir decide not to distribute dividends from its 2025 profit?

Kardemir announced in its disclosure dated March 13, 2026, that no cash dividends would be distributed in order to finance strategic investments and strengthen the capital structure. The company aims to manage its debt load by supporting high-cost projects like SDM-2 with equity.

How will the EU's new quota regime in July 2026 affect Turkey?

The post-safeguard regime, which will come into effect in July 2026, could shrink Turkey's quota-based export volume to the EU by 47%. This will force Turkish producers to turn to markets outside the EU (North Africa, Middle East) or sell within the EU by paying duties.

What does Kardemir's SDM-2 investment mean?

SDM-2 (Continuous Casting Machine) is the most critical production stage where liquid steel is converted into solid form. The new machine offers better surface quality and more precise sizing, enabling Kardemir to provide products to sectors demanding high-quality steel, such as automotive and machinery manufacturing.

When will Erdemir's 2026 dividend payment be made?

The total cash dividend payment of 3.85 billion TL approved at the Erdemir General Assembly has a deadline of December 15, 2026. Payments are expected to be made in installments or as a lump sum by this date.

Outlook

The year 2026 is going down in history as a year of "adaptation and consolidation" for the Turkish steel industry. Kardemir's SDM-2 investment has registered its entry into the league of 3-million-ton giants by combining its 89 years of experience with modern technology. Erdemir continues its sector leadership by maintaining the balance between financial discipline and investment appetite. However, the regulatory storm coming from the EU in the second half of 2026 will cause all these investments to undergo a real test.

Looking ahead, the main agenda item for Turkish steel producers until 2027 will be "green steel." It will become impossible for companies that cannot reduce their carbon footprint to compete in Europe, the largest market. In this context, Kardemir's vacuum plants and Erdemir's modernization expenditures are efforts to guarantee future market shares, not just today's. The Turkish steel industry 2026 data proves that the sector continues to remain growth-oriented despite the challenges.

Source

This report has been prepared using data compiled from KAP, SteelOrbis, and the 2026 investor presentations of the relevant companies.

The information contained herein is not within the scope of investment consultancy. It is recommended that you make your investment decisions in line with your own analysis and the opinions of authorized institutions.

Source: KAP

Primary source: KAP