Market and product

The Turkish plastics market is likely to recover strongly and outpace other countries in Central and Eastern Europe, but local buyers are still nervous at the rate of recovery in the eurozone and are purchasing petrochemicals feedstock on a hand-to-mouth basis, according to BMI’s latest ‘Turkey Petrochemicals Report’.

Lacking a broad domestic petrochemicals industry capable of fulfilling domestic needs, Turkey will create significant demand for chemicals for its own conversion industries. The key factor underlying Turkish petrochemicals demand is the strength of the recovery of the EU economy. Converters supplying to the export-oriented automotive and consumer goods industries will increase demand for basic plastics. Growth in the EU will also tighten European petrochemicals markets, prompting Turkish converters to diversify away from suppliers in the EU. In Q110, Turkey absorbed excess European PP supply, which was highly competitively priced compared with non-European suppliers. However, despite zero duty on EU imports compared with 3% on Asian imports, BMI believes European offers will rise to a premium compared with Middle Eastern and Asian supplies from Q210, thereby prompting Turkish converters to look further afield for supplies. The same story is largely true of PE, with European offers at a premium compared with Middle Eastern suppliers in April 2010.

However, in Q210 buyers of both PP and PE signalled a reluctance to buy at high tonnages, preferring to meet needs through spot contracts. This indicates some nervousness among Turkish converters about the prospects for their own markets and the possibility that end-markets may falter amid the lingering industrial capacity overhang and a weak recovery in the eurozone. Additionally, buyers were waiting for the impact of the capacity surge in the Middle East and Asia on prices, which are expected to see significant moderation in growth over the short term. Consequently, risk-averse Turkish buyers will delay purchases and inventory building.

As for domestic production, going into 2010 Turkey’s ethylene production capacity remained unchanged at 520,000tpa, providing feedstock for plants with capacities of 140,000tpa ethylene dichloride, 100,000tpa ethylene glycol, 80,000tpa ethylene oxide, 100,000tpa HDPE and 310,000tpa LDPE. Turkey has capacities of 150,000tpa PP, 150,000tpa VCM/PVC capacity, 140,000tpa PTA, 135,000tpa benzene and 80,000tpa PS. As there have been no firm new project announcements, BMI has not changed its forecasts for the petrochemicals sector.

State-owned petrochemical company Petkim’s operating rates are likely to rise to maximum capacity in 2010 from 90% in 2009. By the end of 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 overvaluation of the Turkish lira. Nevertheless, Petkim is investing US$60mn in cost-reducing projects in 2010 in the drive to improve efficiency and long-term profitability. Turkish plastics production capacity reached around 5.6mn tpa in 2008 and was forecast to reach 6.5mn tpa in 2009, 11.3mn tpa in 2013 and 13mn tpa by 2014.

(Source: http://www.companiesandmarkets.com/Summary-Market-Report/turkey-petrochemicals-report-q3-2010-287802.asp?prk=1e67c019a885b856d9e600ef58ec396b)