Investment Rises in Plastics Processing Machinery

The coronavirus pandemic negatively affected production in the plastic processing machinery sector during the first half of the year, while investments increased. According to PAGEV data, in the first half of 2020 compared to the same period of the previous year, production in the plastic processing machinery sector declined by 6 percent and exports fell by 15 percent, while investments in the sector rose by 27 percent and imports increased by 47 percent. The plastic sector did not pause investments despite the challenging conditions experienced globally and in Turkey due to the pandemic. The increase in investments was driven by excess demand in hygiene and medical products. According to data contained in the Plastic Processing Machinery Sector January-June 2020 Monitoring Report published by the Turkish Plastics Manufacturers Research, Development and Training Foundation (PAGEV), capacity utilization in the general machinery sector was above the first quarter of 2019 in the first quarter of the year, but fell below 2019 levels in the second quarter. Thus, capacity utilization in the general machinery sector, which includes plastic processing machinery, declined by 11.2 points in the first six months of 2020 compared to the same period in 2019, reaching an average of 68.5 percent. With the pandemic's negative impact on the plastic and plastic-consuming sectors, plastic processing machinery production declined by 6 percent in the first half of 2020 compared to the same period of the previous year, falling to USD 214 million. During this period, plastic processing machinery production comprised: presses and other machinery 47 percent, components and parts 24 percent, extrusion machinery 13 percent, injection machinery 7 percent, thermoforming machinery 6 percent and blow molding machinery 3 percent.

Exports declined while imports increased

As a result of the pandemic restricting foreign trade worldwide, the sector's exports declined by 15 percent during this period, falling to USD 82 million. The top five countries leading in exports were: Russian Federation, Germany, Algeria, India and Romania. While exports fell, imports rose, and in the first half of the year the sector's imports increased by 47 percent to USD 255 million. The countries with the highest imports during this period were: China, Germany, Italy, Austria and Taiwan.

Trade deficit increased by 128 percent

The plastic processing machinery sector's trade deficit in the first half of 2020 increased by 128 percent compared to the first half of 2019, reaching USD 173 million due to rising imports and declining exports.

Machinery and equipment investments rose 27 percent

Machinery and equipment investments in the plastic sector in the first half of 2020 increased by 27 percent compared to the first half of 2019, reaching USD 387 million. This increase in investments was notably driven by rising demand for packaging. While 66 percent of these investments were met with imported machinery, the domestic machinery sector did not obtain the desired share of this growth. Imported machinery investments rose from USD 174 million in the first six months of 2019 to USD 255 million in the first six months of 2020. During the same period, domestic machinery production reached USD 132 million.

Decline expected in the second half of the year

Based on first-half performance and the probable effects of the coronavirus pandemic on the economy and plastic sector, it is estimated that plastic processing machinery production will decline by 20 percent by the end of 2020 compared to 2019, falling to USD 406 million, and sector exports will decline by 21 percent to USD 156 million. On the other hand, imports are estimated to increase by 15 percent to USD 485 million and plastic processing machinery investments to rise by 1 percent to USD 735 million. PAGEV Chairman Yavuz Eroğlu, noting that the contraction in demand appearing since mid-March due to the pandemic affecting the entire world had negative repercussions on the sector, said the following: "As a result of the coronavirus pandemic, the global halt in production in the automotive sector, as a main supplier of which is our plastic sector, had a quite negative impact on us.

Our companies producing finished and semi-finished products for the automotive sector experienced significant job losses during this period, and automotive processing machinery investments were also postponed.

However, the situation was different for our companies engaged in hygiene and medical production. The COVID-19 pandemic confirmed the fact that plastics have vital importance in many areas from food to packaging. With Corona, there was a significant increase in masks, gloves, face shields, test kits, disinfectants, cologne bottles, food packaging and single-use products made of plastic for hygiene purposes. The decline in the plastic sector during the pandemic was not larger thanks to increased consumption in food packaging, cosmetics and disinfectant packaging, hygiene products and single-use plastic packaging. Although almost all indicators were negative in the first half of the year, the 27 percent increase in machinery investments stemmed from better understanding of the role plastics played in hygiene during the pandemic and consumers' interest in such plastic products," he said. Pointing out that it is important for the plastic sector to continue investments despite the challenging period experienced in the world and Turkish economy due to the pandemic, Yavuz Eroğlu said, "Turkey's plastic sector ranks sixth globally and second in Europe, and despite the economic difficulties experienced in the world and Turkey during the pandemic, it continues to invest to grow and narrow the gap. This must be facilitated and made easier. Ideally, we would like the share of domestic machinery to increase. To this end, increasing support for domestic machinery production and protection against imports is certainly important, but to avoid cutting off investments, it is important not to take restrictive measures on companies' investment in machinery that is not produced in Turkey or whose industry has not yet reached a certain level. A balanced and analytical strategy should be applied on this matter," he said.