4 February 2010

Turkish Chemicals Industry Report

Sector Overview

The Turkish chemical industry has been active for several decades, providing many basic and intermediate inputs to various industries. The industry employs more than 80,000 people in around 4,000 companies with a production value around 15 billion Euro in 2006 (latest available).
The industry comprises 11 publicly quoted companies, with a total market capitalisation of around $2 billion (December 2009), the largest company being Petkim Petrokimya Holding A.Ş. (“Petkim”) with a market capitalisation of $ 926 million (December 2009).

The main petrochemicals company is a former public company, Petkim, privatised in 2007. 51% of Petkim's equity was acquired by Socar-Turcas Energy for a consideration of $ 2,040 million. 10% of the company is still owned by the Privatisation Administration and the remaining 39% is free float on the Istanbul Stock Exchange. Petkim's Alia¤a petrochemicals complex in ‹zmir has an annual capacity of 3.2 million tons. Petkim's product range includes LPDE, HPDE, PVC, and PP products, masterbatches, olefins, fiber and aromatics. These products are important inputs for the construction, electricity, electronic, packaging, textile and also medical, dying, detergent and cosmetic sectors.
In addition, Tüpraş, Turkey's largest petroleum company with 28.1 million ton crude processing capacity, owns a petrochemical production facility with an annual capacity of 50,000 tons.

The Turkish textile industry is a major production and export centre in global terms, thanks to its resource availability, ranking seventh in global cotton production with a capacity of 3.1 million of 480 lb. bales in 2007/08. It has proximity to Europe and other important markets, and a highly qualified workforce.
Textile exports have increased considerably during the last decade from $ 3.4 billion in 2000 to $ 9.3 billion in 2008 (CAGR of 13.2%) boosting its supply chain including the chemical producers in parallel.

The Turkish fertilizer industry has an established production capacity around 5.6 million tons in 11 factories around the country. Gübre Fabrikaları, Bagfaş, Gemlik Gübre, Ege Gübre, Igsaş, and Toros Gübre are major fertilizer producers. Domestic production covers the majority of domestic demand but there are also imports.
Trends in agriculture are important for the industry as fertilizer is a major agricultural input. The national agricultural income is increasing but at a slower rate than GDP, decreasing the ratio of agricultural income to GDP from the most recent peak of 14.3% in 1997 to 8.4% in 2009 (three quarters).

The pharmaceuticals industry is one of the most major subsectors within the chemical industry providing approximately 10% of the industry's production. Further information regarding the pharmaceutical sector is provided in the “Turkish Health Industry Report” in this series.

Home & Personal Care
The Turkish home care market size in 2008 was around $ 1.2 billion. P&G, Unilever, L'Oreal, Colgate and other major multinationals have been in the Turkish market for many years. Detergent and exports have reached TL 598 million in 2009 (11 months) representing 0.7% of all exports, up from 0.5% in 2007 and 2008.
2008 market size for personal care products was around $ 0.9 billion. Hair care products have the largest share making up one third of the market, followed by personal wash, toothpaste and deodorants.

Paints & Coatings
The Paints & Coatings sector has developed significantly matching the growth in Turkey's construction, automotive and marine industries. Annual production capacity has reached 800,000 tons and the capacity utilization ratio is around 65%.

Soda, Chrome, Boron
Turkey has specific competitive advantages being globally one of the main producers of soda ash, chrome and boron. Soda Sanayii A.Ş., a private company under the fiiflecam Group, is the main producer of soda and chrome. The company has annual production capacity of over 1.5 million tons of soda (including the capacity of its subsidiaries), 70 thousand tons of sodium bichromate, and around 250 thousand tons of chrome20.

Another important player is Eti Soda A.Ş., owned by Ciner group, which utilizes an extremely rich trona (natural soda ash) reserve found near Ankara, at Beypazarı. It is globally the second largest reserve after a reserve at Wyoming in the U.S.. The factory started operating in March 2009 with an expected annual production capacity of 1 million tons. A new substantial trona reserve has recently been found near Ankara-Kazan. The aggregate natural reserves at Beypazarı and Kazan are estimated at around 836 million tons.
Around 72% of the world's boron reserves are in Turkey. Boron products are inputs for agriculture, detergent and soaps, ceramics, insulation fibreglass, timber preservation, flame retardants, nuclear power stations, cosmetics and medicine, metallurgy, and many other industries. Pure boron exports in 2008 totalled $518 million.

International Trade
After a stage of rapid growth (2006-2008 CAGR of 24.9%) reaching USD 6.1 billion in 2008, Turkey's chemical exports decreased by 33% in September 2009 compared to September 2008 mainly due to the global economic downturn. Based on recent information, a 0.7% increase was realised in October 2009 compared to the previous month, indicating a slowdown of the effects of the downturn.
Exports of chemicals constitute around 4.5% of all Turkish exports, ranking the industry 4th by total value of exports after automotive, steel, and textiles. The Russian Federation, Italy, Germany, Romania, and the Ukraine are the largest export customers for Turkish chemical industry exports (26.6% of the total).
Imports of chemicals, which are broadly 4 times the exports, increased with a CAGR of 17.8% between 2006 and 2008. The imports in 2008 totalled $ 25.6 billion. Turkey imports mainly from Germany, France, the U.S., Italy, Belgium, the U.K. and China.

REACH is the acronym for Registration, Evaluation and Authorisation of Chemicals. The REACH proposal requires industry to register all existing and future new substances with a new European Chemicals Agency. REACH aims to improve the protection of human health and the environment while enhancing the competitiveness of the EU chemical industry and avoiding the fragmentation of the internal market.
In this context, as detailed in CEFIC's website, the main objectives of REACH are:
• To establish a coherent registration system designed to provide basic hazard and risk information on new and existing chemical substances manufactured in or imported into the EU;
• To reverse the burden of proof, moving it away from Member States' authorities to producing and importing companies, who will be responsible for demonstrating that substances can be used safely;
• To introduce responsibility for downstream users to provide information on uses and associated risk management measures relating to substances;
• To maintain the existing restriction system and to introduce an authorisation procedure for the most hazardous substances as a new instrument;
• To ensure greater transparency and openness for the public by providing easier access to relevant information on chemicals;
• To establish a European Chemicals Agency to facilitate the administration of REACH and ensure that the system is applied in a harmonised way across the EU;
The Turkish Undersecretariat for Foreign Trade has encouraged its affiliated body The General Secretariat of İstanbul Mineral and Metal Exporters' Association (IMMEA) to establish the first help desk and IMMEA has been functioning as an industrial help desk as from September 2007. IMMEA conducts awareness activities and provides technical help and guidance for Turkish exporters.

SWOT Analysis

- Strong export potential
- Significant growth outlook for many subsectors (i.e. pharmaceuticals, home & personal care, coatings, etc.)
- Awareness and support concerning REACH
- Young and knowledgeable workforce
- Turkey’s geostrategic importance
- Availability of some rare raw materials (soda ash, boron, chrome)

- Relatively small scale by international standards
- Insufficient hazardous waste processing facilities
- Unregistered trading within the industry

- R&D investment and training of the workforce may increase efficiency
- Likely expansion of local refining capacity
- Turkey’s likely EU partnership
- Increasing investment in private sector
- Better trading climate with neighboring countries

- Fluctuating input prices
- Extended timetable for Turkey’s EU partnership

The Turkish Grand National Assembly has approved the Ninth Development Plan (2007-2013) on 28 June 2006 with Law No: 877. This development plan is fed by a list of Committees, including the Committee for the Chemical Industry. In their sub-division report, the Chemical Industry Committee has highlighted the following steps for the industry's future development:

• Establishing an economically stable environment for continuous growth;
• Increasing the competitiveness of the industry;
• Improving the human resource quality;
• Reducing the level of dissimilarities among different regions of the country so that natural resources could be processed within their own regions;
• Extend the ongoing improvements in governance. The following steps were highlighted as the means of achieving the abovementioned goals:
• Investing in research and development;
• Investing in human resource development;
• Improving the amount of local inputs and reducing the dependence on imports;
• Improving the cooperation between the industry players and the governing body in conjunction with the ongoing changes as part of Turkey's commitment to join the EU;
• Improving supervision and eliminating the unregistered trading within the industry;
• Investing in and improving the level of occupational health and safety;
• Emphasizing the importance of the chemicals within the national industry;
• Improving the attractiveness of the industry to foreign investors.

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