Turkey's insulation segment growing faster than the construction sector

With Turkey undergoing a major construction drive during the last few years, many associated trades have seen solid growth. One segment showing particularly impressive expansion has been insulation, which has averaged higher growth than construction as a whole, on the back of the insulation of both existing buildings and new ones. There is also still much room for further growth, as Turkey aims to achieve similar levels and standards in insulation as its EU neighbours.

Growing Awareness

According to the Association of Thermal Insulation, Waterproofing, Sound Insulation and Fireproofing Material Producers, Suppliers and Applicators ( İZODER), the sector had an annual average growth rate of 25-30% from 2011 to 2013, and has grown tenfold in as many years. By 2012, the sector had a turnover of €4bn, up from just €300m in 2004, with İZODER expecting €5.1bn in turnover in 2013.

In terms of raw volume, according to the Istanbul Chamber of Industry, the sector sold 14.2m cu metres of heat insulation material in 2012, the latest year for which figures were available, up from 11.7m a year earlier and just 6.1m as recently as 2006. The forecast for 2013 was 16.4m cu metres, representing growth of 15%.

The sector employs 80,000 people among 200 companies, according to İZODER, with 20 key local players, of which the top five are Kalekim, Ode, Eryapı, Izober and Grofen. Foreign firms also have stakes in the industry – mostly from Germany, Austria, France and the US – and have been increasing their shares through a wave of mergers and acquisitions in the past half-decade.

It is estimated that some 85% of the 19m houses in the country lack insulation. Indeed, the government has set a deadline of 2017 for the completion of a national insulation programme. The energy loss due to the lack of insulation is huge. Around 75% of Turkey’s energy is imported, with some $60bn spent on Turkey’s current 115.3m tonnes of oil equivalent (toe) of energy consumption, according to İZODER data. Some 36.8m toe of this is consumed by buildings. The association estimates that energy worth some $11.5bn is thus lost each year due to lack of building insulation. At the same time, this energy loss causes significant carbon emissions. This makes plans to insulate every building in Turkey both enormous in scope and potential savings.

Challenges

İZODER and its supporters would like to see the value-added tax on insulation materials reduced and for banks to receive tax incentives on financing insulation materials and loans for projects related to energy efficiency, while investors could also get subventions on interest for these. İZODER would also like estate taxes to be reduced for buildings with higher-grade energy efficiency – from January 2011, new buildings are required to get an energy certificate, passing with a minimum C grade, while all existing buildings have to acquire one by 2017. Awareness is growing, although more could be done. Insulation schemes tend to pay for themselves in the medium to long term, but economic uncertainties and low incomes can mean homeowners postpone upgrades. To overcome this obstacle, public education campaigns are vital to making owners aware of the benefits of insulation.

One move in this direction was the summit on thermal insulation held in September 2014 by İZODER and the Istanbul Directorate of Environmental and Urban Planning, attended by industry stakeholders and intended to raise awareness. Though themes ranged from proper thickness, quality and inspection for insulation systems, one of the hottest topics was unfair competition. Some domestic firms produce below-standard insulation materials, undercutting competitors, but construction firms install them all the same – a problem only exacerbated by lack of proper inspection.

Water insulation, too, is vital in a city such as Istanbul, where research after the 1999 earthquake showed that 64% of the buildings that collapsed did so because of rusting rebar in their concrete supports – often because no water-proofing system had been installed. For insulation companies, the hope is that the Turkish government will soon bring in a package of incentives that will help address what remains a pressing issue.

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The Report: Turkey 2015

Construction & Real Estate chapter from The Report: Turkey 2015

The Report: Turkey 2015

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