2021-2022 Chemical Industry Assessment

Adil Pelister

Chairman of the Board at IKMIB

Our chemical sector, which plays a strategic role in the economy with its 16 sub-sectors and is among the 5 target sectors in the Export Master Plan, broke new record with 25.4 billion dollars of exports in 2021, exceeding the pre-pandemic level. During this period, we grew by 38.79 percent. We aim to reach 28 billion dollars in exports this year.

Creating the second highest export volume in our country, our sector makes great contribution to our economy. While our chemical sector was the export leader in May and June during the year, we renewed our monthly record with 2.49 billion dollars in exports in December. While our import was $97.32 billion in 2021, our trade volume was $122.7 billion.

Among the product groups in our sector we exported the most in 2021, plastics and plastic products increased by 41.99 percent compared to last year and reached 8.99 billion dollars. Ranking second, export of mineral fuels, mineral oils and products increased by 78.97 percent to 5.58 billion dollars. Our exports of inorganic chemicals, which ranked third, increased by 30.47 percent to $2.07 billion. Our rubber and rubber goods exports, which ranked fourth, increased by 25.67 percent to $1.48 billion while our pharmaceutical products exports, ranking fifth, increased by 19.41 percent to $1.42 billion.

Our industry exported to 229 countries and regions in 2021. Among the countries we export chemicals the most, the Netherlands ranked the top with 1 billion 340 million dollars in exports, followed by Germany with 1 billion 220 million dollars, Iraq with 1 billion 179 million dollars and the USA with 1 billion 141 million dollars. Our exports to the United
States increased by 36.06 percent compared to last year. One of the target sectors announced by our Ministry of Trade, the USA ranks the top among the target markets prioritized by our chemical industry. The other countries following the USA in the top
ten were Italy, Greece, Belgium, Spain, England and Lebanon.

In 2021, employment in our chemical industry increased by about 7 percent. The number of employed persons, which was 375 thousand people in 2020, reached approximately 400 thousand people in 2021. Our Association realized more than half of the exports of our chemical sector with more than 8,500 active members and its share has been 58.75
percent of the total chemical exports.

As the supply chain, which had been disrupted by the pandemic, was redefined, our Turkish products became more preferred in terms of both quality and price. Therefore, deferred demands were expected to be reflected in sales. On the other hand, more production and sales made at high unit prices have also played a role in increasing our exports. Our unit
prices per kilogram increased from $0.75 in 2020 to 0.94 in 2021.

Since the beginning of this year, we have arranged 3 national participation organizations for the Arab Health, AEEDC and The Inspired Home exhibitions, and two exhibition visits, one domestic, one abroad and Export Stars Award Ceremony. In addition to the pharmaceutical and medical sectors, we organized 3 workshops on plastics recycling and cyclical
economy. In the next period, we plan to arrange 10 national participation organizations, 5 info stand participations, 4 fair visits, 3 sectoral trade delegations, 4 hosted buyer organizations and to organize our R&D Project Market.

On the other hand, we anticipate that the negative effects of logistical problems as well as increasing raw material supply and price issues will continue with the Russia-Ukraine crisis. Russia and Ukraine are two important countries we trade with. We wish this crisis ends as soon as possible. Because, also as a result of the crisis, energy costs and commodity
prices in the world continue to climb. On the other hand, the support our state will provide to our exporters and the improvement of the economic environment are of great importance in terms of the investments to be made in our sector and ensuring the sustainability of our export increase.

Another issue that is important for our sector is the European Green Deal. We believe that relations with the European Union should be strengthened and improved. We are following carefully the regulations planned to be implemented within the framework of the Deal and the changes being made in the EU Chemicals Legislation.

The EU market, where we export the most, accounts for 40 percent of our total chemical exports. For this reason, the EU market is an important market for our sector. However, the United States, China, Russia, Mexico and India are among our priority target countries.

In the transition to a low-carbon, green economy, especially for the access of our SMEs to financing, green financing support must be provided. It is of great importance for sustainable growth and competitiveness that our companies determine their needs for green transformation as soon as possible and realize their transformation with the support of the government in this area.

However, in line with our sustainability vision, we continue to work on our Chemistry Technology Center project, which is important for the future of our chemical industry and which will primarily serve the plastic, cosmetics, paint and rubber sectors, and will be the first in Turkey. We continue our preparations to launch our Chemistry Technology Center, which will include a digital library, reference laboratories that will provide certification services with international accreditations, R&D center and entrepreneurship incubation center, in 2022.

When we look at the developed countries, we see that their chemical sector is also developed. In this respect, special emphasis should be attached to the chemical sector. In this regard, we believe that Turkey Chemical Agency should be established in our country, and we believe that it will take the sector forward and thus will also take other sectors forward and make a very important contribution to the development of the country.

Onur Kipri

General Manager at Akkim Kimya

Last year was a successful one for Akkim Kimya, full of strong growth and investment steps. At the beginning of the year, we acquired USK Kimya, one of the largest carboxymethyl cellulose producers in Turkey and the world, with an investment of 63 million dollars.

While making this investment, we considered USK Kimya’s high export power, know-how capability and domestic market dominance by far. With the participation of USK in Akkim, the share of our exports in total turnover approached 40 percent. By the end of the year, we increased our strategic support to the Turkish economy by exporting more than 100 million dollars in total.

We have made significant progress with the motto “Sustainability is Our Chemistry”, which is valuable for Akkim. In the sustainability assessment made by EcoVadis, we maintained our ranking in the top 3 percent in all categories on a global scale in 2020, in 2021 as well.

We have completed the third stage audit of the “Zero Discharge of Hazardous Chemicals (ZDHC)” program, in which the sustainability of textile chemicals is evaluated, with the highest score in Turkey. We have the Global Organic Textile Standard (GOTS) certification, and we are among the “Bluesign®” system partners, which is one of the standards that helps the textile industry move towards sustainable targets. In addition, last year, we were entitled to receive a Zero Waste Certificate as a measure of the value we created in the
circular economy.

Starting from 2022, when we celebrate our 45th anniversary, we aim to increase our annual turnover to 600 million dollars in the next five years, together with our subsidiaries. It is also among our goals to double our annual exports.

This year, new investment plans will be on our table in line with our organic and inorganic growth strategy. With our investments, we will strengthen our contribution to our country in areas such as exports, employment, production and innovation.

On the way to our goals, the understanding of sustainable development will always be important. We will continue to create value for our stakeholders within the framework of the common goal of a more livable world.

We have recently signed the “United Nations Women’s Empowerment Principles (WEPs)” and set our practices with a gender equality understanding that we will implement under the Akkimce brand until 2025. We see areas such as the European Green Deal climate action plan, risk management process and employee volunteering as an important part of our strategy and embrace it as the management.

Haluk Erceber
TCMA Chairman of the Board

In 2021, the Turkish Chemical Industry has achieved the highest production, export and import volumes and thus historical success since 1960.

Chemical industry, which consists of sub-sectors with NACE 20-21-22 codes, reached a total trade volume of 67 billion USD in 2021. Exports of the chemical industry increased by 32% compared to the previous year and reached 24 billion USD. Likewise, our imports increased by 42% compared to 2020 and reached 49 billion USD. Our sector, which
has more than 20,000 companies and 370,000 employees, has been maintaining its 2nd place in export position in Turkey for years.

However, what is worrisome is that the sector is in the first place in terms of level of imports and Turkey’s total foreign trade deficit with a rate of approximately 54% The major problem stands out as the sector’s inability to scale up and the lack of new high-tech investments despite all the efforts of industrial organizations The most important need
and target for the development of the sector and new investments is to increase the scale by being included in the Industry cluster, which has a ready infrastructure and a port, which makes it possible to increase profitability by shipping savings, the presence of the customer and the manufacturer in the same area, focusing on production without infrastructure operation problems.

The export products of our companies in the chemical sector are generally 60-70% medium technology and 30% high technology products. Although the unit sales price of the export product is around 1.2 USD, the unit price for imports is close to 2 USD.

Our sector companies, which successfully managed the 2020-21 pandemic period in a perfect and healthy working environment, realized 44% of total exports to EU countries in this period. The most exported countries are Germany, Italy, United Kingdom, Spain, Netherlands, Belgium, Iraq, USA, Egypt.

As of the end of 2020, the breaking of the supply chain and the necessity of high freight payments have reduced the profitability of the chemical industry, which depends on imported raw materials by 70-75%, and increased Turkey’s imports. Our industry, which has completed the whole year with an average capacity utilization rate of 80%, has
used its proximity to the EU with great success and has always shown that it is an important supplier among the EU chemical industrialists and gained appreciation.

As TCMA, we are pleased to see that the management of the European Chemical Industry Council, Cefic, of which we are a member, has shown us the closeness and increased confidence in Turkish Chemical Industrialists in this difficult period. We expect the start of strategic partnership efforts for the EU’s most reliable supporters and investment collaborations within the scope of the Carbon Border Adjustment Mechanism (CBAM), the EU’s Chemicals Strategy for Sustainability (Essential Uses Concept-REACH 2.0), Sustainability and Green Twin Transformation, which will be renewed in 2022. For these investments, the presence of a chemical cluster with a port and the support of strong government incentives are essential. However, in the current situation; In order to increase exports and reduce such high imports, new investments in accordance with the European Green Deal, which uses many large-scale and high-tech technologies, should be initiated.

When the incentive application data are analyzed in 2021 (except for December), it is seen that 10,622 incentive applications were made for all sectors with a total investment amount of 216.2 billion TL. When the 2021 incentive application data for the Chemical manufacturing sub-sector is examined, it is seen that there are 159 incentive applications
with a total investment amount of 8.3 billion TL.

It is seen that the share of the chemical sub-sector within all sectors within the scope of investment amount is 4%, and the share of the chemical sector on the basis of number of documents is 1 % among all sectors.

It was also observed that there was no investment incentives in the support class “large-scale” group in 2021, both on the basis of all sectors and the chemical sub-sector.

In 2021, 14 incentive applications with an investment amount of 1.97 billion TL were made within the scope of support class of strategic investments on the basis of all sectors, when we examine the chemical sub-sector for 2021, it is seen that 1 incentive application with an investment amount of 290 million TL has been made.

The share of the chemistry sub-sector within the scope of support class strategic investments in all sectors is 15% in TL and 7% in terms of number of documents.

Unfortunately, there are no large-scale incentive applications for climate change and energy transformation in the chemical sector within the scope of the EU, European Green Deal. The envisaged support elements are mostly insurance premiums, tax deductions, etc.

As TCMA, our most significant goal for the Chemical Industry in 2022 will be to ensure the realization of new production facility projects using high technology in compliance with the EU new legislation. Only in this way we can reduce our foreign trade deficit and contribute more to our economy and employment.