Intensity of Metal (Steel) Use Hypothesis: A Test for Turkish Economy

The quantity of steel consumed can be considered as an indicator of industrial development as nations move to higher stages of industrialization, since the steel consumption has been thought to be closely linked to the rate of economic growth, which influences the level of activity in steel intensive sectors (Huh, 2011). After the World War II, the worldwide metal consumption increased rapidly and, this led to a concern about the supply of metals and a fear of early depletion (Wårell, 2014). As part of a broader effort to develop simple but accurate techniques for forecasting the future demand for metals, the International Iron and Steel Institute (1972) and Malenbaum (1973) suggested the intensity of use hypothesis during the 1970s. This hypothesis maintains that the intensity of metal use is a function of economic development as measured by real GDP (Guzmán et al. 2005). Intensity of use curve rises, peaks, and then decline as per capita income increases. For this hypothesis the intensity of metal use depends on the economic development in a country and changes over the development stages of the economy. Therefore the relationship between intensity of metal use and economic development exhibits an inverted U-shaped pattern. The main purpose of this study is to test the intensity of (steel) use hypothesis for Turkey during the period 1955-2012 using the cointegration technique with structural break. Given the dataset and time series techniques used, results indicate that the steel consumption and real GDP have the long-run relationship.