Turkey Petrochemicals Report Q4 2009

Turkey Petrochemicals Report Q4 2009

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.

Executive Summary .5
SWOT Analysis7
Turkey Petrochemicals Industry SWOT 7
Turkey Political SWOT 7
Turkey Economic SWOT. 8
Turkey Business Environment SWOT. 8
Global Market Overview..9
Global Ethylene Capacities .. 9
Table: World Ethylene Production By Country, 2008 And 201f (‘000 tonnes capacity) 9
Polypropylene 12
Global Oil Products Market Review 15
Table Global Oil Prices, 2003-2013 (US$ per barrel). 19
Turkey Market Overview..20
Market Structure.. 21
Market Evolution . 22
Table: Turkey’s Petrochemicals Sector – Cracker Capacity, 2007-2013 (‘000tpa).. 22
Petrochemicals Business Environment23
Table: Central And Eastern Europe Petrochemicals Business Environment Ratings .. 23
Limits Of Potential Returns. 23
Risks To Realisation Of Returns 24
Industry Trends And Developments ..25
Table: Turkey’s Petrochemicals And Plastics Market, 2004-2015 (‘000 tonnes) 27
Post-Privatisation 27
Projects And Expansions . 28
EU Accession 31
Industry Forecast Scenario .32
Table: Turkey’s Petrochemicals Imports, 2003-2007 (‘000 tonnes) 34
Table: Turkey’s Petrochemicals Sector, 2005-2013.. 34
Macroeconomic Activity .. 34
Table: Turkey – Economic Activity .. 36
Company Monitor37
Petkim.. 37
Turkish Petroleum Refineries Corporation (Tüpras) 39
Dow .. 41
DuPont (Advansa) .. 42
Country Snapshot: Turkey Demographic Data 43
Section 1: Population. 43
Table: Demographic Indicators, 2005-2030. 43
Table: Rural/Urban Breakdown, 2005-2030 44
Section 2: Education And Healthcare. 44
Table: Education, 2002-2005 . 44
Table: Vital Statistics, 2005-2030. 44
Section 3: Labour Market And Spending Power . 45
Table: Employment Indicators, 2001-2006 45
Table: Consumer Expenditure, 2000-2012 (US$) .. 45
BMI Methodology 46
How We Generate Our Industry Forecasts 46
Chemicals And Petrochemicals Industry .. 46
Cross Checks 47
Business Environment Ratings 48
Table: Petrochemicals Business Environment Indicators And Rationale 48
Weighting 49
Table: Weighting Of Indicators . 49