How Will the UN's Iran Sanctions Effect The Turkish Chemical Industry?

Turkey’s strong chemical industry touts soda ash, chrome chemicals and boron chemicals as some of its main products. Murat Akyuz, Chairman of the Board of Management of Istanbul Chemical Substances and Products Exporters’ Association, talked to TURKOFAMERICA about the industry’s current situation and future expectations.

It’s notable that the Turkish Chemical Sector had a decrease of 29% in exports for 2009. What kind of export performance are you expecting for the end of 2010?    
The global crisis has also effected our companies in a negative way, as it did in many sectors. Positive indications have started to be seen as of the second half of 2009 in the chemical sector, which had lost blood rapidly due to the crisis. When our exports are studied on a month-by-month basis, it stands out that our exports to countries, which are located close to us geographically, and in Africa, has increased. As for the last month of 2009, almost a chemical explosion has taken place. As a result of the activities of finding new markets, the exports of the sector has increased by 55.49% in terms of value and by 36.22% in terms of volume when compared with that of December of 2008.

When the exports during 2008 are compared with 2009 numbers, it is seen that there is a decrease of 22.23% in terms of volume and 29.12% in terms of value. While chemical exports valuing 13,610 billion dollars were made during 2008, this fell to 9,646 billion dollars during 2009.

As for 2010, we are moving forward towards our target of 12 billion dollars by the end of year and with 1 billion dollars for each month with firm steps.

When the latest statistics are studied, gun powder, explosive substances and their derivatives lead the product groups, where the sector exports to the USA the most.   (829,000 dollars for the first three months of the year) What are the product groups that have the most export potential to the USA market for the sector, which has its activities in a very wide range of products, from pharmaceuticals to fertilizers, from artificial flowers to rubber?
The exports of the chemical sector to the USA is at the level of 105 million dollars for the first five-month period of 2010. This means as an increase of 36% when compared to last year. Basic chemicals, that is organic and inorganic chemical groups. constitute 35 million dollars of this amount. The exports have been 22 million dollars for the rubber group and 15 million dollars for the plastic group. The product group, which you have mentioned, is the group that has achieved the largest export increment with an increase of 315%.  In addition, the export of soaps and cosmetic products has reached a number that exceeds 5 million dollars during the first five month period of 2010. Pharmaceutical products, on the other hand, which is another group, has achieved an export value of around 2 million dollars with a increase of 70%.   

Iran is one of the countries that the chemical sector exports to. How would the sanctions that the USA is trying to impose on Iran through the United Nations effect your sector?
The exports we have achieved in the chemical sector to Iran during the first 5 month period of 2010 have already reached the amount of 200 million dollars. Obviously, interruption of trade due to political reasons would effect our sector and the economy of the country in negative ways. In addition, Iran is one of the leading suppliers for energy requirements, which is the most basic need for the industry. The situation should be analysed in all aspects in the long term and not just on the basis of exports. A possible instability in our region would create a seriously negative impact on the exports of our country all around of the Middle East.

Is it possible to say that there is an inclination for the exporters to turn their attention towards other countries rather than the counties of the European Union since the contraction in the European market due to the crisis? How much of a real alternative can North America be in this sense?  
The economic crisis has effected Europe and North America in rather serious dimensions as well as other geographical regions of the world. The chemical industry in the EU countries has slipped back by 3 – 4%. The Pacific-Asian countries, headed by China, have survived the crisis with a minimum of damage. The share of these countries for the chemical exports of our country has risen to 34% from 32%. But that of the EU countries has fallen from 29% to 27%. Up to 30% drops have been seen for the chemical exports of Turkey to EU countries due to the contraction of the demand in the EU countries.

Our exports to the USA, Canada and Mexico in the chemical sector in the first 5 months has already exceeded the amount of 120 million dollars. For example, the first 5 monthly exports that have been made to Mexico have shown an increase of 195% as compared to last year. We do not look to this issue as an compulsory change of market during the crisis period. We think of this in the context of the dynamism of the trade and as a factor that alternative markets should always be held in hand.

Can you extrapolate what kind of strategy the Turkish chemical sector would need to implement in order to grow during the next 10 years by looking at its transformation during the last 10 years?
The industrialization of the chemical sector in Turkey started during the 1950’s. It  developed during the 1960’s and 1970’s. We have witnessed the setting up of two petrochemical plants that belonged to the state during the 1970’s and 1980’s as well as the establishment of a large number of small and middle-sized private companies. A decrease has been observed for the customs tariffs of the chemical products immediately after changes were made in the Customs Act in 1984. Hence, a fast growth has taken place for the production field and capacity of the Turkish chemical industry in parallel with the export potential.

Our sector achieved a growth of 2.5% during 2008.  Our sector had around 50 billion dollars turnover in 2008, with sales from the production side of around 15 billion dollars. Exports of the Turkish chemical sector rose to 15.9 billion dollars in 2008. Around 500,000 people are employed in the chemical sector, and it continually increases its share of Turkey’s total exports. The employment is mainly achieved in the private sector.   

We are getting over the effects of the global economical crisis.  Our sectors exports are showing a rather good performance since the beginning of the year. The exports of our sector, which has lived through a rapid return to the days before the crisis, has shown an increase of 47.57% in January and 43.64% in February, based on value. The biggest increase during the five monthly periods has been achieved during the month of March. The chemical sector exportations have increased 75.15% during March by breaking an important export record. The rise for the exports for the month of May of this very important and principal sector of our country, where it closed the month of April with an 41.52% export increase, has been 41.61%.     

We have determined the 2023 export target of the sector as 50 billion dollars. This means that we should keep up the average increase rate of 11% for every year.  Our main target for the years ahead of us is to produce the products which create added value and catch the competitive advantage with these products in the foreign markets. We are aiming at being able to compete not only in certain regions but around the world as the Turkish chemical sector.  

The chemical sector is placed among the top three industries in the developed countries. The positions of the textile and automotive industries, which were the locomotive sectors of Turkey some time ago, are changing year by year. What are your expectations for the parallelism that should be shown between the development level of the country and the growth of the chemical sector?   

The chemical sector is a sector which has strategic importance for every country, because it is one of the principal sectors and supplies raw materials for all branches of industry.  The rise of the chemical sector to first place in parallel with the development levels of the countries is the main indicator for this issue. Therefore, I think that this type of progress will also be achieved in our country, which shows fast growth and which does not lose its courage despite the economical crisis. Moreover, the first steps of the development in this direction had been put forward before the crisis and the chemical sector had risen to third place as the sector that had achieved the highest export levels by leaving the ready to wear clothing sector. But this positive development was unfortunately cut back by the global crisis. However, we are able to see that the increase is at the top level when we look at the exports of the chemical sector together with the easing back of the effects of the crisis.  

Therefore, I believe that our sector will also reach in our country a level comparable to the rest of the world. Our aim is to provide every kind of support and help for our sector in this path.  

Points you would like to add ...
Our sector will continue to increase its contributions to the economy of our country by gaining more strength every year. I would like to restate my belief at this occasion, that I believe that the sector would be much more effective with the cooperation of the public and private sectors.