Past growth draws materials, machinery suppliers to Turkey

Istanbul — Turkey is attracting a lot more attention from global materials and machinery suppliers, drawn by its rapid growth in the last 10-plus years to become Europe's second or third-largest market for plastics processing, depending on how it's measured.

It's moved ahead of countries with traditionally larger plastics sectors like France and the United Kingdom, and has surpassed or pulled even with Italy, traditionally the second largest.

The last two years have been more difficult — global economic softness, domestic political uncertainty and the spillover from wars in Syria and other neighbors have all taken a toll. But Turkey is seen as having solid long-term prospects.

It's become Europe's largest manufacturing base for white goods; it has a sizable car manufacturing industry; and its plastics processing industry is a significant exporter to the Middle East.

“As a global player, you can't afford not to be in such a growth market,” said Horst Klink, A. Schulman Inc.'s vice president of engineering plastics for Europe, the Middle East and Africa, in an interview at the Plast Eurasia show in Istanbul in early December. “And it's regarded as a growth market.”

Turkey's processing industry is the largest market for plastics materials exports from the European Union, taking 13.7 percent of exports. That's ahead of China with 12.4 percent and the United States with 11 percent, according to 2014 data from the PlasticsEurope trade group, the most recent figures.

Turkey's plastics processors are solid regional exporters, averaging a trade surplus in finished plastic products of $900 billion annually from 2012-2014, according to data from the Turkish Chemical Manufacturers Association.

The biggest attraction for global firms is the heavy reliance those processors have on imports: more than 80 percent of Turkey's resin and plastics machinery are imported.

Relying on imports

That makes the country different from others with large plastics processing sectors, like Germany, Italy, China or Japan. China's injection molding factories, for instance, buy more than half of their molding machines domestically.

Fairlawn, Ohio-based Schulman is building a masterbatch facility in Turkey, and Klink said the company is looking at an engineering plastics compounding facility.

Celanese Corp. opened a sales office in Istanbul in late 2014, saying it was attracted in part to Turkey's position as the world's second-largest maker of major home appliances.

Dallas-based Celanese said there's growing technical demands from Turkish appliance makers like Arçelik A.S., which is Europe's second biggest white goods maker and a large molder on its own with 1,200 injection presses.

“Turkey for us is a big growth market,” said Dorothee Harre, sales director for emerging regions in Europe, Middle East and Africa. “Even though it has been a little more difficult this year for the industry, we were still very happy with our growth.”

“For now it is difficult because it is more of the commodity materials market but we definitely see a move to more highly engineered materials,” she said.

That commodity, price-oriented market is the biggest hurdle at the moment for global firms.

More than 60 percent of the 1,650 injection molding machines imported in the first nine months of 2015 came from China, according to figures from Engel Holdings GmbH, the world's largest maker of injection presses.

Turkey may be the second-biggest plastics processing market in Europe, but the China figures show it's not the second-biggest for the kind of higher-priced equipment that Western suppliers focus on.

Still, Engel's top executive in the country believes that long-term, there's a lot of potential.

“At the moment [Turkey is] unfortunately not the second biggest market in Europe for Engel but we believe that the chance and the possibility to grow in Turkey is bigger than in other countries,” said Kadir Topucar, managing director of Engel's Turkish subsidiary.

Turkey's plastics processors had about 8.3 million pounds of production in 2014, up from 7 million in 2011.

PlasticsEurope data shows Turkey was the fifth-largest export market for EU finished plastic products in 2014.

On the reverse side, Turkey's plastics processors are the fourth-largest source of imported plastics goods in Europe, behind the United States, Switzerland and China.

Growing despite turmoil

Topucar and others pointed to four elections in the last two years as dragging the economy, as well as weakness in some export markets and the impact of the fighting in Syria, Iraq and the region.

Beyond losing what had been important markets like Syria, Turkey is currently hosting more than 2 million refugees from those conflicts, a larger number than all of Western Europe combined.

Given those political challenges, some Turkish executives said they were glad to be growing at all. Foreign executives at the show seemed to be trying to balance Turkey's record of growing faster than neighbors in Europe, against the more recent troubles.

“The Turkish market still has opportunities to offer, it's the second biggest market in Europe, but it's mainly commodity driven,” said Hans Rukes, the Istanbul-based managing director of the Turkish subsidiary of German compounder Albis Plastic GmbH.

“During the last few years it had bigger growth rates than any other country in Europe but the overall economic environment has slowed down the last two years and business with plastics became a more challenging activity as well,” Rukes said.