Abstract
Foreign producers will be unable to use the Turkish market to offset declines
in Europe with Turkey as
the country feels the full force of the economic
meltdown, according to BMI’s latest Turkey
Petrochemicals Report.
Turkey is typically dependent on imports for up to 2mn tonnes per annum (tpa)
of
polyolefins. However, domestic industries are experiencing a sharp
downturn in external demand, which
has in turn prompted a sharp adjustment
in domestic demand.
With investments and aggregate demand falling by the
double-digits and industrial output falling an
average 22% y-o-y in Q109.
Imports have undergone a massive contraction due to the weak domestic
demand environment. At the same time, export-oriented industries that consume
petrochemicals products
– particularly the automotive sector –
have slumped alongside sliding demand in Europe. BMI is
forecasting a 6.2%
contraction in GDP with the construction sector forecast to fall 9.4% and
the
automotive industry set to see a slump of 35% in unit volume in 2009.
These factors are likely to lead to a
drop in petrochemicals demand of at
least 30% in 2009.
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.
Some modest expansion of existing refining capacity can
be expected over the next three years. Were all
the projects currently
planned to proceed, overall Turkish refining capacity could reach 1.3mn
barrels per
day (b/d) by around 2013. BMI is assuming delays and
cancellations, with maximum capacity of
800,000b/d by 2013. As there have
been no firm new project announcements, BMI has not changed its
forecasts
for the petrochemicals sector. 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. BMI
believes 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. BMI 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.
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