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Turkey Petrochemicals Report Q2 2012

The breaks are likely to be put on Turkish petrochemicals consumption growth in 2012, as the country’s
industrial sector faces a precarious external position and a deteriorating macroeconomic backdrop,
according to BMI’s latest Turkey petrochemicals report.

Exports are slowing in line with weaker demand out of the eurozone, in addition to deteriorating business
sentiment indicators. In turn, firms' propensity to engage in large-scale investment spending is likely to
remain weak until there is a fundamental improvement in economic conditions. As such, industrial
growth is set to plunge from an estimated 11.4% in 2011 to 4-5% over the following five years,
suggesting sluggish rates of chemicals and plastics demand over the forecast period.

On the upside, demand from the automotive industry is set to rise, with BMI forecasting that production
will reach around 1.9mn vehicles by 2016, up 58% over 2011 estimates, although 2012 will be a difficult
year. On the downside, waning confidence in the Turkish construction sector, a major consumer of PVC,
prompts us to believe that the market grew by a moderate 8.5% in 2011, with the industry forecast to
experience even slower growth of 6.5% in 2012. However, we remain optimistic about the long-term
growth potential in the segment, thanks to a slew of ongoing high-profile projects in the country.
Themarket is not expected to contract and should pick up from 2013 as Turkey continues to develop as an
industrial base serving both Europe and the Middle East.

Over the short-term, Petkim plans to increase capacity at its existing petrochemical complex, raising
ethylene capacity by 80,000tpa to 600,000tpa. The company plans to raise capacity at its tubular LDPE
plant by 20% to 145,000tpa. Its target is to increase gross production from 3.1mn tpa to a minimum of
6mn tpa by 2018. A planned ethylene unit will double olefins capacity at the complex. Petkim is also
planning to introduce products to its slate that will be made for the first time in Turkey.

In 2011, Turkey’s ethylene production capacity reached 600,000 tonnes per annum (tpa), 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.

Turkey remains in fifth place in BMI’s Central and Eastern Europe petrochemicals business environment
ratings this quarter with 48.5 points, up 1.4 points due to an improvement in its long-term financial risks.
This puts it 9.0 points behind Hungary and 2.1 points ahead of Slovakia. Turkey’s strength lies in the
improvements in market risks, particularly following Petkim’s privatisation, but this has been partly
offset by a decline in its country risk score amid economic recession and deteriorating indicators. Foreign
investment is being encouraged into downstream sectors in order to bolster the country’s
industrialisation.

Chemistry   Market study
Year:   2012
Publisher:   Business Monitor International Ltd.
Price:   530.00€
More about Business Monitor International
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