According to BMI, the short term outlook for the Turkish petrochemicals industry is challenging, with the depreciation of the Lira and the rising cost of credit dampening domestic demand, but export growth and low stocks should help lift demand in the second half of this year. BMI believe that the pace of polymers growth will be partly determined by the strength of the export oriented automotive sector as well as the domestic construction industry. Although 2014 GDP growth has been revised down by BMI from 2.6% to 1.5%. Due to the fall in domestic currency in the first few months of this year, demand for major polymers declined in Turkey. A few domestic polyethylene converters have suspended production lines and major domestic petrochemicals producer Petkim has stopped producing at full capacity due to payment issues prompted by an interest rate hike. BMI believes this trend will be reversed in the second half of this year as stocks are depleted and orders increased.
Oil and gas
BMI believe that Turkey will remain heavily dependent upon oil and gas imports for the foreseeable future. However, its role as a critical energy transit hub between Europe, the Eastern Mediterranean, the Middle East, Caspian and Russia provides it with a unique form of leverage and makes it a key player in the global energy market.
Turkey’s improving relationship with Iraq is providing a potential major new source of imports. However, a new pipeline connecting the region of Kurdistan directly with Turkey is now in place, though due to this being separate from Baghdad controlled monitoring stations exports have been deemed illegal. Turkey has stipulated that a go ahead from Baghdad is required before oil is officially exported, yet the wait for an agreement between Erbil and Baghdad is delaying duel import diversification efforts.
Turkey remains a key player as a major market for Eastern Mediterranean gas. Diplomatic relations with Israel have improved, while peace talks with Cyprus are becoming increasingly pragmatic, say BMI. A continued pragmatic relationship between the three partners will be key in order for Turkey to import Israeli gas, particularly as Egypt is providing competition for Leviathan gas.
Despite Turkey being a major energy consumer it is a minor hydrocarbon producer. Turkish domestic energy production is in decline, with BMI’s forecasts suggesting that total oil and natural gas production has peaked. At the same time, demand for both oil and gas will continue rising steadily and weigh further on the country’s import bill.
Adapted from press release by Claira Lloyd
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