Turkey petrochemicals forecast suggests tough future

New forecasts show that Turkey's petrochemical and chemical sector is in line for a tough 2009.

Turkey had become used to double digit growth in demand for plastics and chemicals, sucking in imports from Europe and Asia. No longer. Here is chemicals content of the report, just out:

"While 2009 will be a terrible year for the Turkish petrochemicals market, we maintain that the country remains among the best positioned economies in emerging Europe to recover in late 2010. We hold to the view that H109 will be the trough of the current recession. With the economy set to grow 1.7% in 2010 with a concurrent recovery, BMI forecasts a strong rebound in petrochemicals. Two key industries consuming petrochemicals – the automotive and construction sectors – will see growth of 8% and 3.6% respectively 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.

By the end of 2009, petrochemical capacities are forecast to include 420,000tpa of PE, 150,000tpa of PP, 150,000tpa of PVC and 520,000tpa of ethylene. The economic downturn will have a highly negative impact on petrochemicals output in 2009, particularly given the importance of the automotive industry as one of its chief consumers. It is believed 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 5.6mn tpa in 2008 and was forecast to reach 6.5mn tpa in 2009, 11.3mn tpa in 2013 and 13mn tpa by 2014. However, the plastics industry will be impacted by the raising of import tariffs on petrochemicals from 3% to 6.5%. Although providing local producer Petkim with some protection from foreign competition, the new taxes will make it more expensive to import the raw materials needed for plastic production. Turkey is dependent on foreign raw materials for its needs, with 84% imported in 2007. On a positive note, the Turkish Plastics Industry Association has reported that plastics exports increased 25% in 2008 to reach US$43.7bn.

Plastics accounted for roughly 27% of total chemicals exports, with the main export markets being Russia, Romania, Ukraine, Iraq and Germany. The report forecasts plastics production capacity not exceeding 9mn tpa. For some polymers, Turkey’s needs have to be covered largely by imports, with PVC 81% imported, PP 87% and HDPE 80%. In the case of LDPE, local production met 62% of needs in 2007. The share of domestic producers will rise in 2009, although this is in the context of a decline in overall sale volumes."

Saudi's target Turkey for agrobusiness ventures

A company from resource-scarce Saudi-Arabia is to invest arpund $3bn in agriculture in Turkey. With their fast-growing populations and inability to grow enough to feed them, Middle East countries are looking all over Africa, Asia and Russia for this kind of investment.

The blog wonders what the impact will be on demand for chemical fertilisers and agrochemicals? Presumably very positive since we're talking large-scale agri-business here on an industrial scale.

According to All About Feed, "private Saudi firm Planet Food World (PFWC) will invest over the next five years to export food products to the Gulf region, the head of its Turkish unit said.

PFWC wants to build 20,000 industrial farms over the next five years, Mete Mutluoglu told Reuters.

Each farm is seen at 10,000 square metres and will raise vegetables and fruits as well as having fish, poultry, sheep and cattle-raising facilities. PFWC’s total land usage in Turkey is seen at 200sqkm.

At first instance most exports will go the Saudi Arabia and the Arabian Peninsula, but the company would also like to export to Russia and Europe in the future.

Turnover in the first five years from the activities may be in the range of $20bn for the agricultural goods. This could go even higher when additional planned food and animal-processing plants are functioning.

Saudi Arabian firms have been looking abroad to grow food for the country and Gulf region. PFWC also has a project in Ethiopia, while others are looking at Tanzania and Sudan."

Turkey in the doldrums

According to today's Wall Street Journal, Turkey's economy shrank by 13.8% in the first quarter of 2009 compared to last year. This is an astonishing performance and is bound to have had a negative impact on demand for chemical products.

Turkey has, historically, had a large polymer deficit and relies heavily on imports. With the long-delayed privatisation of the country's largest company, Petkim, now complete a large investment programme is underway. Will this be put on hold?

In May, ICIS reported that Turkey should expect its largest petrochemical company Petkim to meet 40% of domestic petrochemical demand by 2015 compared to the current 25%. Capacity is scheduled to double to 6.3m tonnes/year from 3.2m tonnes/year within six years.

51% of Petkim is owned by the State Oil Company of Azerbaijan (Socar), Turkey's Turcas Petroleum and Saudi Arabia-based developer Injaz Projects.