The Turkish Pulp&-
Paper Industry Foundation
was established
in 1989 and currently
has 20 member companies
which in aggregate
represent approximately
80% of P&C production
capacity in Turkey.
These companies supply
predominantly to domestic
manufacturers for
end-products to be consumed
domestically. In
fact only 11% of national
production was exported
in 2009.
I put statistical data in statistics section of this magazine. You
can see there yearly evolution of P&C consumption, domestic
output and production capacity over the last 5 years.
The capacity was 2.5 million tons in 2005 and it became 3.5
million tons in 2009 which means 40.5% increase in 5 years.
Same as the consumption, it was 3.7 million tons 2005 and
today it reached circa to 4.5 million tons.
The Industry was growing steadily up until 2008, when economic
downturn led to 6% drop consumption.
In response, P&C Companies lowered their capacity utilization
rates and output but this was more than offset by 19%
hike in capacity entering the market. This new capacity was
the result of heavy CapEx in 2005, when companies invested
to expand capacity to meet the double digit consumption
growth at the time.
In 2009, we saw some recovery in consumption with 2%
growth. As capacity growth adjusted downwards, production
contacted by 2 % as Turkish P&C companies struggle under
heavy pricing pressures.
With in 5 years, our production remained as 25th in the world,
whilst our consumption ranking increased over the years from
18th in 2005 to 16th in 2008. This up stick is driven by various
factors, as I will explain shortly.
It’s important to note our per capita consumption remains well
below European average-partially explained by national habits
and partially by the landscape of the Turkish economy –
and offers significant growth potential for the Industry.
We can break down the drivers of this demand into main categories :
A. Demand coming from higher usage of individual
consumption :
As the focus on efficiency and functionality increases, individual’s
habits also change towards products that are easy to
use and dispose of, effective, and ideally better for nature.
This change in habits leads to higher usage of day-to-day
paper products such as tissue paper and various paperbased
cleaning supplies.
This increase is further boosted by overall population growth
which was more than 1.4% in 2009, and has been over 1.2%
over the last ten years. Note that approximately 75% of the
population lives in urban areas, with increasing access to retailers
and supermarkets.
Lastly, tourism is also a factor that drives the demand for certain
paper-based products, albeit the consumption in this sector
is more volatile. Tourism sector grew 18% in 2008 and
contracted 3.2% in 2009.
B. On the Retail/Wholesale side, increase in demand
comes from 3 areas :
1. Export sector : Stricter regulations on packaging with respect
to health standards and recyclability resulted in paperbased
packaging to become more favored compared to
plastic. As Turkish economy strengthened and increased exports,
EU regulations also forced the companies to utilized
paper-based products. Global P&C industry also facilitated
this trend by innovation and increased cost efficiencies.
2. Secondly, expansion of chain supermarkets in Turkey fueled
the demand for P&C products, as they – unlike smaller
mom&pup shops – have a higher focus on product shelf life,
and hence require appropriate packaging.
3. Lastly, change in marketing led to higher usage, as packaging
became increasingly important in product differentiation,
and used to enhanced product appeal.
Domestic production has historically been kept below capacity
due to competitive pressure. Key to this dynamic is cost
structure of the P&C Companies, which is determined by their
access to raw materials.
In Turkey, the Industry has not established any plantation forests
to secure its pulp supply. Therefore, relies almost solely
on imported, ready-to-use pulp. This dependency results in
high input cost volatility for the Industry.
With the respect to recycled waste paper, the Industry also
faces limitation and has to rely on imports to meet its production
needs.
Currently, on 40% of waste is being recycled – and although
there are government regulations in place, these are not
being monitored sufficiently.
As you know recycling is also a cultural habit ; and as the national
awareness rises and recycling becomes easier with
more accessible recycling binds, collection points, etc., this
ratio its expected to improve, as well. With in the fiber
consumption in the total P&C production 70% fibers created
from recycled waste papers.
Of course, this dynamic is typical for emerging industries in the
global markets, and Turkish P&C players can also face and
overcome this challenge with time and strategic initiatives.
In short, we believe that Turkish P&C market presents significant
opportunity for both domestic and international players. Strong
consumption is expected to support growth in the Industry, however
the rate of growth will depend on how fast we can improve
access to key raw materials at competitive prices.
In that respect, an important strategic initiative would be to establish
plantation forests in the long-run to secure future supply
for the Industry. TR’s geography is particularly conducive
to grow such plantations and become a competitive supplier
of forest products.
But the key initiative for the near-terms is to enhance our the
recycling capabilities-which is in fact an area of increasing
focus for both our Foundation and the authorities.