Turkey's plastics industry eyes rebound from tough two years

Istanbul — Turkey's plastics industry, one of Europe's largest for plastic product manufacturing, has had a difficult two years, as it's absorbed global economic uncertainty and the spillover from wars and instability in neighboring Syria and Iraq.

The country's industry grew quickly for much of the last decade, averaging 10 percent a year, but since 2014 growth has slowed sharply and industry officials are projecting between 1.5 and 3 percent growth in final 2015 figures.

That would put the industry at about 8.3 billion to 8.4 billion pounds of plastic processed.

That decade-long track record of expansion has gotten Turkey more attention from the global industry, and that interest has remained through the downturn. But executives are clearly watching the current situation closely, judging from interviews at the PlastEurasia show in Istanbul in early December.

At the moment, business planning in Turkey seems to require a high degree of comfort with uncertainty.

Selcuk Aksoy, head of the Istanbul-based trade association Plasfed, said companies had been hoping that November elections, the fourth in the last two years, would point to a clearer direction.

“Of course everyone was waiting for the elections to finish so we could look forward to business as usual, but unfortunately this incident with the Russians happened,” he said, referring to a Nov. 24 incident that saw Turkey's military shoot down a Russian fighter plane on the Turkey-Syria border. “There is a lot of effects on the Turkish economy.”

Turkey exports about $250 million a year in plastic products, about 3 percent of its total production, to Russia, along with about 15 percent of its plastics machinery exports, and Selcuk and other executives were assessing the impact.

The head of the Turkish Plastics Industry Foundation, or Pagev, said he believes growth in plastics in 2016 will accelerate because politics had delayed needed investments in the industry.

“Turkey's expanding plastics industry needed more investments to come,” said Pagev President Yavuz Eroglu. “But for investments, you have to foresee. The problem was you couldn't foresee. Because you couldn't foresee there was a lot of delayed investments.”

Eroglu pointed to his own company, thermoformer and injection molder Sem Plastik, as evidence. The company in December decided to go ahead with a $30 million investment in a new factory near Istanbul, roughly doubling its capacity.

“We were also delaying the investments for the last 2 years,” he said. “We bought the land but we were waiting, because we would like to see that there is a solid government.

“There is a lot of investment coming up after this election,” he said. “So I believe that 2016 will be a nice year.”

Still, lot of uncertainty remains, and that exposes what Pagev calls “the most important problem” facing the Turkish plastics industry over the long-term: low added value in its manufacturing.

It said Turkish plastic products exports are priced 32 percent below the world average.

Kadir Topucar, the Turkey general manager for Austrian machine maker Engel Holding GmbH, said fluctuations in the exchange rate for the Turkish lira hurts planning.

“It effects the Turkish companies because the exchange rate, by euro and dollar, is changing always,” he said. “It's very, very difficult to make a plan for the industry.”

Plasfed's Aksoy said exchange rate changes are hazardous for Turkey's commodity oriented processors: “A lot of fluctuations means you cannot make your business plan for a low margin business.”

The local plastics industry slowed to about 1.5 percent growth in the first half of 2015, Pagev said, but executives were hoping for a pick up in the second half, to about three percent for the year.

Pagev called that “good, but far from impressive in an industry where the average growth has been 10 percent in each of the past 10 years.”