Interview: Sadettin Korkut

What do you believe are the primary factors driving growth in the Turkish petrochemicals industry?

SEDATTIN KORKUT: The petrochemicals industry provides raw materials to numerous sectors. Globally, it has assumed a level of importance on par with the iron and steel sector, as one of the primary forces in the development of a country’s industrial base. In Turkey, demand for petrochemical goods outpaces GDP growth by a factor of two. In fact, Turkey is one of the fastest growing markets for thermoplastics after China.

Given Turkey’s lack of domestic hydrocarbons, what keeps the chemicals industry competitive?

KORKUT: Although Turkey relies on imports for the vast majority of its natural gas and petroleum needs, it does have other advantages. The chemicals industry is a capital-intensive sector requiring advanced information and technology. Turkey is able to leverage its flexible manufacturing model, highly-productive human resources, and its proximity to sources of hydrocarbons and to potential export markets. In addition, the government provides special subsidies for local production that also add to the country’s competitiveness. When you look at some of the most successful countries in the sector, such as Germany, France and South Korea, you see that many of them possess relatively few hydrocarbon resources themselves.

What is the role of the petrochemicals industry in helping Turkey to reach its 2023 targets and the goal of having $50bn in chemical exports in particular?

KORKUT: Turkey is currently a net importer in the chemicals sector, unlike the EU countries mentioned above. In 2014, the trade deficit for the chemicals sector, excluding mineral oils, stood at $20.47bn. Turkey is the 19th largest economy in the world, but ranks 29th in chemical product sales and 32nd in ethylene production. Given the considerable trade deficit facing the country, it is important that it develops its export capacity across all industries, including chemicals, which is why the government has set these goals. Over the past few years, the global chemicals industry has suffered as a result of the lingering effects of the financial crisis. The petrochemicals segment was growing at an annual rate of 6-8% before 2008 but has experienced annual growth of 4-4.5% since then. That said, some regions have fared better than others. While many new projects have been cancelled in Europe, the resource-rich countries of the Middle East and North America continue to attract investment; for example, by 2018, 10m tonnes of new ethylene capacity is expected to come into play in North America and 7.5m tonnes is expected to be added in the Middle East.

To reach its ambitious 2023 export goals, the Turkish chemicals sector will need to grow at an average annual rate of 12%. Developing the petrochemicals segment is essential, as all other segments within the sector rely on the raw materials that it provides for their own manufacturing needs. In order to ensure that our chemical exports are competitive, we also need to keep costs down and finances under control. Aggregation of production facilities will play a very important role in addressing both of these needs. Plans for an integrated refinery, petrochemicals, energy and logistics hub are currently being developed for the Petkim Peninsula with the help of SOCAR, the Azeri state-owned oil company. By bringing together these disparate inputs, we believe that there are large gains to be had in terms of the development of the country’s chemical manufacturing industry as a whole.

How successful has the sector been in moving towards the production of higher value-added products and reducing imports of intermediate goods?

KORKUT: In 2014, high-technology goods accounted for 5-6% of Turkey’s $157bn of exports. In order for this proportion to reach the target of 20%, there needs to be a long-term plan for the sector. Additionally, Turkey needs to decrease its reliance on imported intermediate goods, which currently account for 70% of imports.