Imports dominate Turkey's processing industry

Istanbul — Turkey's plastics processing industry, probably more so than any of its other large global competitors, is heavily dependent on imports.

Between 2003 and 2015, for example, imports accounted for 79 percent of the $8 billion invested in plastics machinery, according to the Istanbul-based Turkish Plastics Industry Foundation, or Pagev.

And in resin, the country imported $10.6 billion worth of polymers a year, while it exported just $1 billion, on average from 2012-2014. Imports supply more than 80 percent of Turkey's plastic raw materials, Pagev said.

Turkey's plastics processing industry ranks among the 10 largest in the world, with processing capacity of about 8.3 billion pounds a year. That dependence on imports makes for a very competitive domestic market.

“Turkey is probably the largest spot market in the world,” said Selcuk Aksoy, president of the Istanbul-based trade association Plasfed. “If prices are dropping the first drop happens in Turkey and when prices are increasing the first increase will be seen here.”

Turkish trade groups would like their country to have stronger materials and machinery makers to better support the local injection molders and other processors.

Pagev, for example, wants the government to set up special manufacturing zones for foreign resin makers, particularly from low-cost feedstock areas in the Middle East, to manufacture in Turkey.

But that proposal is running into resistance from some local Turkish raw materials makers, said Pagev President Yavuz Eroglu.

Some Turkish executives say the country's limited oil and gas resources make it difficult to develop much resin manufacturing capacity, especially in commodity polymers.

There's probably more chance for the local machinery industry to develop, and some companies in the sector are chipping away at the dominance of imports, particularly in extrusion and recycling equipment, industry executives say.

“There are some areas where there are local companies that are very strong,” said Plasfed's Aksoy. “This is an area where you cannot generalize.”

But broadly speaking, Aksoy said there are big challenges for Turkish machinery firms.

“Being close to Europe is a curse for our machinery producers,” he said. “You can really get very good machinery in relatively good payment conditions from Europe.”

Injection machine market

The dominance of imports may be most pronounced in injection molding machines, where foreign equipment captures more than 90 percent of the market.

Between 2003 and 2014, Turkish injection molding companies spent $1.78 billion on molding machines, with 94 percent of that — or $1.68 billion — coming from imports. Turkey typically imports just over 1,900 molding machines a year.

Chinese companies have the largest share, accounting for just over 60 percent of imports by units of injection presses. Because their equipment is less expensive, that translated to about 45 percent by sales price in the first nine months of 2015.

Germany is a distant second, accounting for 15 percent of Turkish imports by sales price. But if you add Austria, the No. 3 source of Turkey's injection machinery imports, the German-speaking bloc accounts for 26 percent of sales through September of this year.

Turkey's injection press market has had healthy growth for more than a decade, averaging 6.3 percent a year compounded annual growth from 2001-2014, according to figures from the Istanbul office of Austrian firm Engel Holding GmbH, one of the world's largest press makers.

In spite of the current strength of Chinese injection machines in the market, Engel's general manager for Turkey, Kadir Topucar, believes the country has a lot of potential for upper-end European equipment as its automotive, white goods and other sectors becomes more sophisticated.

“For Engel, growing means also the change from low cost to high cost,” he said. “At the moment the high cost share of molding machines is between 40 and 50 percent. I believe it will change in the next 10 years.

“The demands on quality in the population will increase,” Topucar said. “Therefore you need these machines to fulfill the demands of the population.”

Germany's Arburg GmbH + Co KG echoed that, saying that long-term, Turkish processors are upgrading to focus on exports to Europe and other demanding markets, which requires better quality equipment.

“High-performance machines with high accuracy are mainly imported from Europe,” the company said in comments prepared for Plastics News.

Upgrading R&D

Turkey's machinery industry recognizes it needs to upgrade its research and development, said Berkay Somnez, sales and marketing manager for Gebze-based extrusion machinery maker Mikrosan Makina ve Kalip San. AS.

The industry is sandwiched between European competitors with technology and more budget machines from Asia, which is “actually sometimes a very difficult” position for Turkey's local producers, he said.

Mikrosan is Turkey's largest extrusion machinery supplier, but 10 years ago, Somnez said it did not even have an R&D department.

Now, the company with 180 employees has six engineers in its research department, he said. It used the PlastEurasia show in Istanbul in early December to introduce what it said is a first in Turkey, a blow molding machine with full servo motor control.

Mikrosan sees an opportunity to take market share away from imported machines.

“Every year Turkish companies import $30 million of blow molding equipment,” said Somnez. “If there's any possibility of stopping importing and selling this kind of line, it's also good for Turkey.”

Turkey's plastic trade associations acknowledge that the machinery sector has not developed as quickly as the country's processing industry.

In a report distributed at PlastEurasia, Pagev said the country's machinery industry “is continuously losing its ground due to cheap plastics machines producer countries, particularly China.

“The gradual downsizing in the plastics processing machinery industry in Turkey,” Pagev said, “is caused by the fact that there is not a state strategy towards the processing machinery industry, the domestic manufacturers are not protected enough and … the plastics product manufacturers prefer cheap and second hand machine imports in order to get the edge over competition.”