The Turkish petrochemicals industry has managed to sustain high operating rates despite the recession, due in large part to the restructuring of and investment in the country’s largest producer Petkim following its privatisation in 2008, according to Companies and Markets. The Turkish recession, which saw the economy contract around 6% in 2009, hit the domestic petrochemicals market. Unlike many other industrial sectors in Turkey, the small petrochemicals industry is reliant on domestic demand. However, the country will outperform the rest of Europe with GDP growth of 3.4% in 2010 and thereafter average 4.7% from 2011-2013.
Throughout 2009, Petkim’s facilities operated at 90% capacity, one of the best performances in Europe. A strong euro benefitted Turkish competitiveness in 2009 and this trend is likely to continue into 2010, thereby putting local petrochemicals producers in a good position to take advantage of the recovery in the domestic market. By end-2009, Petkim was in a strong position, with its market share rising from 22% pre-recession to 30% during the economic crisis. Although the Turkish petrochemicals industry has coped with the recession relatively well, risks remain, namely rising crude prices and potential over-valuation of the Turkish lira. Nevertheless, Petkim is investing US$60 mln in cost-reducing projects in 2010 in the drive to improve efficiency and long-term profitability.
Two of the key petrochemicals consuming industries, the automotive sector and construction, will see respective growth of 8% and 3.6% in 2010, with higher rates of growth thereafter. This should help support the development of Turkey’s downstream industries and give a boost to Petkim, its customers and other Turkish petrochemicals and plastics producers as the industry expands capacity. However, we believe the days of 15%+ annual growth in polymer demand seen in recent years will come to an end, and expect a contraction in the market. Plastics production capacity reached around 5.6 mln tpa in 2008 and was forecast to reach 6.5 mln tpa in 2009, 11.3 mln tpa in 2013 and 13 mln tpa by 2014. However, the plastics industry will be affected by the raising of import tariffs on petrochemicals from 3% to 6.5%. Although providing Petkim with some protection from foreign competition, the new taxes will make it more expensive to import the raw materials needed for plastic production. Crucial to the development of the Turkish petrochemical industry is access to feedstock, which is likely to come from the expansion of oil production in the Black Sea. Newly discovered reserves in the region could potentially make Turkey self-sufficient in oil and would provide a source of naphtha for downstream industries. The completion of a refinery project at Petkim’s Aliaga Complex is expected in 2014 with an investment cost of US$3.5 bln. After receiving official approval of the Environmental Impact Assessment Report, it sped up its activities for the refinery project with engineering and detailed studies conducted in 2010. The refinery is expected to process around 10 mln tpa of crude oil and will be integrated with Petkim’s petrochemicals activities.
Turkey is in seventh place in our Central and Eastern Europe Petrochemicals Business Environment Rankings, with 46.6 points. Turkey’s strength lies in the improvements in market risks, particularly following Petkim’s privatisation in 2008, but this has been partly offset by a decline in its country risk score amid economic recession and deteriorating indicators. Foreign investment is being encouraged into downstream sectors in order to bolster the country’s industrialisation. In 2009 Turkey’s ethylene production capacity remained unchanged at 520,000 tpa, providing feedstock for plants with capacities of 140,000 tpa ethylene dichloride, 100,000 tpa ethylene glycol, 80,000 tpa ethylene oxide, 100,000 tpa HDPE and 310,000 tpa LDPE. Turkey has capacities of 150,000 tpa PP, 150,000 tpa VCM/PVC capacity, 140,000 tpa PTA, 135,000 tpa benzene and 80,000 tpa PS. As there have been no firm new project announcements, we have not changed our forecasts for the petrochemicals sector.