The Chemicals Sector Has Grown in Spite of the Crisis

Parallel to the effects of the current economic crisis, Turkey has now experienced a decline in its exports for the first time in 32 months. The export figures for October 2008 decreased by 1.87% in comparison to the same month last year and by 21.8% in comparison to last year’s auto industry figures.
Murat Akyuz.

Despite this, there has been increase in exports in the chemicals sector, a trend that has been continuing consistently since last year. During the first 10 months of 2008, an increase of 46.7% over the prior year was recorded. The rate of increase in October was 10.2% in comparison to the same month last year. By 2023, exports in the chemicals sector are expected to reach USD 100 billion.

In 2007, the Turkish chemicals sector realized exports to the USA valued at USD 425 million. In the first ten months of 2008, the chemicals sector’s exports to the USA have already reached USD 520 million.

Murat Akyüz, Chairman of the Istanbul Chemicals and Chemical Products Exporters' Association (IKMIB), spoke with TURKOFAMERICA about the current state of the sector and its future.

Turkey occupies the 45th place among 228 countries selling goods to the USA. Total exports for the first nine months have reached USD 1.3 trillion. The total value of chemical companies on the stock exchange in the USA is approximately USD 91 billion and they have an average profit margin of 6.6%. In a country where the market and the figures are so big, what does the Turkish chemicals sector need to do?
Our aim as the Turkish chemical sector is to increase our exports to all countries and to become a global player. The USA is a large market and the most basic way to realize exports to this market is to build a standardized production and export structure. Turkish companies need to be aware, however, that due to matters of security, the USA insists that the exported products be monitored from the production to the packaging stages. The most important factor in the US market is a suitable price, however, and for this reason I recommend that our exporters take this into consideration when quoting prices. Moreover, another characteristic of the market lies in the fact that US consumers are fully aware of their rights and are ready to protect them. The strategy to develop trade and economic relations with the USA and the other North American countries was launched in 2006 and our companies were advised to choose markets on the basis of states. The Generalized System of Preferences (GTS), which enables customs-free export of some products established by the USA, can also be defined as an advantage. The fact that plastic products exported to the USA are sold with 0% customs taxes constitutes an advantage for Turkish exporters.
Besides exports to the USA, can production activities also be carried out? Are there any member countries that have such a plan or that will conduct market research on this subject?

In order to talk about intensively carrying out a project of this kind, it is necessary for relations between Turkey and the USA to cease being so focused on security and for trade and economic relations to gain prominence. When this happens, direct capital investments between the two countries will be included among the most important topics for negotiation. Last year the total US investment in Turkey reached USD 4.2 billion and the total trade volume exceeded USD 12.3 million. However, looking at it from the other side, the situation is still inadequate; the number of Turkish companies investing in the USA is very low. The main reason for this is Turkish investors’ biased approach to costs in the US market.

What is the importance of the US market for the sector of chemicals and chemical products? What part of the total exports goes to the US market?
In 2007, the Turkish chemicals sector realized exports worth USD 425 million to the USA. In the first ten months of 2008, the chemicals sector’s exports to the USA have already reached USD 520 million. The main products exported to the USA include mineral fuels, organic chemicals and inorganic chemicals.

What are the major problems that your member companies encounter when doing business in the USA?

The main problems encountered by Turkish companies doing business in the USA:

- The continuous inspection of containers by X-Ray, because of security reasons.
- The Generalized System of Preferences which is brought up every year and which prevents the establishment of long term marketing strategies.
- The long duration of shipping and the high prices charged by companies carrying out direct shipping.
- The inability of distributing companies in the USA to serve all states.

How is the chemical and chemical product sector in Turkey expected to be affected by the crisis? What are your forecasts regarding production and export in this sector for the next five years?
It is out of the question that a crisis of these dimensions should not affect our country and our sector. However, I hope that its effect on our sector will be at a minimum level. Our export figures support my expectations, but we foresee that the sharp drops in raw materials and petrochemicals in the exports of the last two months will result in a standstill in exports as well.
Turkey’s October 2008 export figures were recently made public. Our total exports have dropped by 1.87% in comparison to October 2007, to USD 9,530,000,000. This is to say that Turkey’s exports dropped for the first time in 32 months. The automotive sector, which occupies the first place in exports, declined significantly in October.  The sector’s exports have dropped by 21.8% in comparison to October 2007. The sector of ready-made garments has experienced a similar situation, with a drop of 17.15%. However, the increase in exports in the chemicals sector, which has been continuing consistently since last year, has continued in spite of the global crisis. In the first 10 months of 2008, an increase of 46.7% has been recorded in comparison to last year. The rate of increase in October was 10.2% in comparison to the same month last year. As of the end of October, our chemical sector figures have reached USD 12,133,000,000. In 2023, exports in the chemicals sector are expected to reach USD 100 billion.

In the USA there are many medium sized companies that may wish to become partners or cooperate with Turkish companies. Keeping in mind the power of consumption in the USA, are there plans for collaborations with small and medium sized companies?

Although existing collaborations within the sector are generally Germany-based, I hope that ongoing regular relations with the USA can form the basis of long term collaborations. I think that the increase in companies with Turkish capital in the region and in the Turkic Republics will result in the speedy increase of small and medium sized companies of this kind.

When you take into consideration the development of the chemicals sector in Turkey, what are the major problems that await the sector in the near future?
The REACH legislation, which came into force within the framework of EU harmonization laws, is the main problem affecting the chemicals sector, as well as many other sectors, such as iron and steel, mining, metal alloys, automotive, stationery and textiles. The REACH legislation, which aims to offer high level protection for human health and the environment and protection for the competitive and effective structure of the market, ascribes the industry responsibility, and therefore high costs, concerning the management of risks resulting from chemicals and the provision of accurate information on chemicals produced.
As Turkey is not yet a member country of the EU, in the short term, the REACH legislation does not directly affect our chemicals production and our export to countries outside the EU. However, if our country becomes a full member of the EU, it will be mandatory for the regulations brought by REACH to be implemented in all the production activities of the chemicals sector.
The REACH system will directly affect our chemicals export to the EU. In the export of chemicals from Turkey to the EU, products to be exported need to be recorded at the European Chemicals Agency (ECHA), in accordance with the REACH legislation.

As our country is not a member of the EU, it is not possible for our companies to apply directly to the European Chemicals Agency (ECHA), within the framework of the REACH legislation. At this point we are confronted with the obligation to form a Single Representation Office, which would fulfill all requirements within the scope of REACH. As IKMIB is aware that the issue of Single Representation will bring financial and administrative responsibilities to Turkish exporters, it has developed a solution and has established RGS, or REACH Global Services company.

Another issue that Turkey may have to confront lies in the probability that, together with an increase in production in neighboring countries, Turkey will remain at the level of spot markets.

1. Univar N.V.
2. Ashland Distribution Co.
3. Brenntag North America, Inc.
4. Helm America Corp.
5. ICC Chemical Corp.
6. Itochu Chemicals America Inc. (ICAI)
7. Harcros Chemicals Inc.
8. JLM Industries, Inc.
9. Hydrite Chemical Co.
10. Canada Colors & Chemicals Ltd.
11. KODA Distribution Group
12. Interstate Chemical Co., Inc.
13. Premium Ingredients International
14. L.V. Lomas Ltd.
15. Quadra Chemicals Ltd.
16. EMCO Chemical Distributors, Inc.
17. K.A. Steel Chemicals Inc.
18. Superior Solvents & Chemicals
19. Hawkins, Inc.
20. Mays Chemical Co. Inc.
21. Grupo Pochteca S.A.B. de C.V.
22. PVS Chemicals, Inc
23. Barton Solvents, Inc
24. E.T. Horn Co.
25. Wego Chemical & Mineral Corp.
26. The M.F. Cachat Co.
27. Startex/CSD
28. Pride Solvents & Chemical Co.
29. The Plaza Group, Ltd.
30. Callahan Chemical Co.
31. Chemicals Inc. (Chemgroup)
32. Allchem Industries
33. Archway Sales Inc.
34. Whitaker Oil Co.
35. H.M. Royal, Inc.
36. Tanner Industries, Inc
37. Solvents and Chemicals, Inc.
38. GS Robins and Co.
39. Rowell Chemical Corp.
40. Durr Marketing Associates, Inc.
41. Tilley Chemical Co. Inc.
42. Cole Chemical & Distributing, Inc.
43. Westco Chemicals, Inc.
44. George S. Coyne Chemical Co., Inc.
45. Industrial Chemicals Inc.
46. Tarr, LLC
47. D.H. Litter Co., Inc.
48. TCR Industries
49. Conchemco, Ltd.
50. Charkit Chemical Corp.
Last modified onSaturday, 06 May 2017 10:07