Petkim Plans to Create A Regional Force in Petrochemicals

How long has Petkim had business relations with the U.S.? What kind of products does Petkim export to the U.S. and what is the importance of Petkim's products for the American market?
Petkim has been exporting different petrochemical products to the US market for 20 years. Export products are C4, benzene, py-gas and orthoxylene. The main export product is C4, used in butadiene extraction for rubber production. Butadiene is the basic raw material of the automotive and tire industry.

How has the current global financial crisis affected your business with the U.S.? What did you learn from the crisis and do you think it is over?
Because of the global financial crisis and its harmful effects on the automotive industry, our C4 sales to the USA have been cut drastically between the third quarter of 2008 and the second quarter of 2009.

Following a sharp contraction in the past year that prompted producers to consolidate their assets, realign their portfolios and reassess their business strategies, many economies are expected to recover from the recession. Consumer demand is recuperating, the global outlook is improving, confidence is recovering, yet there are problems in certain regions.
This year will be a recovery for our industry, yet a return to the “good old days” of the pre-crisis period will not be easy.  That will be difficult to achieve.

Cash & inventory management, i.e. working capital management, cost cutting and the implementation of flexible production models were the main priorities during the downturn.

According to research, Turkey is the third-largest importer of petrochemicals globally. Almost 70% of the demand is met through imports. Is high demand in the local market a disadvantage to seeking new markets?
The Turkish petrochemicals market is one of the fastest-growing in the world, with a twofold GDP multiplier over the last decade. As a result, it has been a challenge for Petkim to maintain its markets share in an ever growing domestic market.
Although the company focuses mainly on the domestic market, it also exports its products to Europe, the US, Africa, the Middle East and Asia. Petkim’s capacity exceeds the domestic demand for some products and there are certain products that are not being used locally in the Turkish market and hence they are exported. Naturally the supply/demand and markets conditions will shape the market and the marketing policies

What is your U.S market share in total export and could you compare your products and services with your competitors?
Petkim’s market share for C4 product is around 30-40% of the total C4 imports of the USA. The quality of the product is considered to be the best in the market by the end-users.  

Customer loyalty is one of Petkim’s big advantages. Petkim has a longstanding relationship with its customers, a reputation of producing high quality products and places great importance to on improving its customer service and customer relations. Petkim has been focusing on improving logistics capabilities, which would make it possible to supply customers’ needs in the most efficient and productive way possible. Most of the competitors downsized and reduced their capacities during  the downturn and could not supply necessary products to their customers. However, Petkim, on the contrary, supported its customers by providing flexible payment terms, by meeting all their product needs, and increasing its after-sales services. Our motto is “customer satisfaction is above everything.”

Can you tell us briefly about the completion of a refinery project at Petkim's Aliaga Complex ?
Pektim’s vision is to create a regional force in petrochemicals operating world class assets by the year 2018. Our shareholder SOCAR & Turcas has aggressive investment plans in Petkim to increase competitiveness in the coming years.  
The Turkish Energy Regulator approved our shareholder SOCAR & Turcas’s operating license in order to build a refinery on Petkim’s premises, just next to Petkim’s petrochemical facilities, in June 2010.

Petkim allocated an area of 130 ha to SOCAR-Turcas Refinery (STAR) for the construction of the refinery. The capacity of this plant will be around 10 million tons of crude oil per year (214.000 barrels per day), and the construction will be started in 2011. STAR will be operational in early 2015.

It is a milestone for Petkim, integration with the new refinery will allow Petkim to secure all of its feedstock needs and increase efficiency by creating synergies between its petrochemical and refining assets. Petkim will also generate rental income from the allocated land in its Aliaga complex and some other revenues from the services and utilities provided to the refinery.

The remaining part of the refinery’s products will be sold in Turkey and Europe. Construction of the refinery on Petkim’s premises is expected to produce a cost advantage of 30% compared to greenfield investments due to existing infrastructure and logistics.

In addition to reduction of transport and warehousing expenses, expenses for security, laboratories, R&D, the number of staff, fire prevention, etc. will also be reduced. It will step up the competitiveness of our products.

In your industry, to increase trade volume between Turkey and the U.S., what should be done?
Turkey and America have been allies for a long time. To increase trade volume between the two countries, the authorities of both countries should take necessary measures. American companies should take advantage of Turkey's strong chemical market to increase exports and imports of products and services. The existing bilateral relations between the two countries would be further expanded and consolidated in both depth and dimension.

What is your vision and future plans for next 5 years (investment, exports, sales, etc.)
Petkim’s growth plan has been developed within the framework of our vision for 2015. Petkim’s growth plan covers short term operation and improvement plans, which include improvements planned for the coming 2-3 years, and mid-to-long term operation and improvement plans, which cover improvements planned between 2011-2015

Petkim’s short term operation and improvement growing plans focus on production, energy, logistics, sales and marketing, the ERP Project, human resources policy, and environmental issues.  In particular, Petkim had a plan to increase the capacities of some of the existing plants to obtain economy of scale in these plants, considering the production costs and the domestic demand for these products.

Petkim’s  mid-to-long term operation and improvement plan is to reach economic scale of production as well as becoming a regional player in the petrochemicals sector in order to increase its long-term competitive power by providing feedstock reliability (upstream investments) and widening its product range (diversification via high value added products, downstream investments).

Would you like to add anything?
I want to thank TurkofAmerica for giving me the opportunity of this interview.

ABOUT PETKIM
The idea of establishing a petrochemical industry in Turkey was adopted in 1962, which was the beginning of the first Five Year Development Plan period. Petkim Petrokimya Holding A.Ş. was established on April 3, 1965 under the leadership of TPAO, following studies and evaluations performed. The new company established other plants after the Yarımca Petrochemical Complex in 1970.

A privatization tender of 51% of the public shares of Petkim through the block sale method handed a share over to Socar&Turcas Petrochemical after a payment of US $2,40,000,000 in June 2008. Petkim, one of the most popular corporations in Turkey, is an indispensable raw-material producer of the industry with its product range of over 50 products. Its petrochemical products are an important input in construction, electricity, electronics, packaging, and textiles, as well as the medical, dyeing, detergent and cosmetic sectors.