On one hand, the oil prices are reduced, and on the other, there is weaker demand. How has this situation impacted your business?
Global manufacturing is entering a severe recession. Sharp declines in final demand, particularly in the automotive, construction and textiles industries, are followed by drastic curtailment of production. We started to operate our plants which have been not working since last November. The main products of our closed plants are the raw materials for the automotive industry. So weaker demand and bad position of the automotive industry affected our business. We had to close the plants. In the near future we will face some problems because of the narrowing demand. Capacity utilization rates in petrochemical industry directly affecting the other sectors. If capacity utilization rates decreases to below 60 % this means all sectors depending on the petrochemical sector will be narrow.
In our country this narrowing in market has been continuing since October. But our domestic market is more optimistic when compared with European Market. And we have more young population than Europe. In Turkey Domestic market can be more vital because of the domestic production. So focusing on the domestic production, supporting the domestic producers makes our business easier when facing the problems of this global crisis.
Besides recession, what near-term challenges you envisage bringing profit margins under crunch for petrochem industry? What strategies are adopted by your company to counter act the current situation?
We have some strategies against the crisis; "We arranged some meetings with our customers as soon as we felt the crisis was approaching. We prepared ourselves by thinking what could happen, what kind of disadvantages we might have etc., when face with the crisis. We have studied the scenarios. We made plans to lower our production costs without causing any losses to both our customer or to ourselves. We also revised our budget.
We prepared a business plan considering the petrochemical sector developments and taking into account the amount of production and sale, selling prices, the main input prices, inflation and exchange rate, financial revenues and the borrowing cost (interest rate of loans taken), purchasing and selling policies and investment program for the next coming years. To convert the crisis results to an opportunity in our business plan we prepared new investment plan by taking in to account the next 10 years supply, demand and price values.
Market news points up ‘West to East shift of production units’ to be the smart choice amongst major petrochem players these days. What is your stance on this shift; has Petkim followed the same trend?
The industry’s center of gravity moves from West to East, petrochemical producers in the Middle East are looking at the world’s fastest growing markets in Asia. Asia already is a booming market for all chemical products, and it will continue to play an important role. In addition to fastest growing market another main reason for this transformation is low cost in raw material, labor and environmental restrictions.
Petkim has a strategy of being a regional force and the main market for Petkim is Turkey. Our market is growing market and we can only meet the 20 % of the demand. We want to increase our market share up to 40 % by strategic partnership with Azerbaijan possesses crude which Turkey lacks. On its part, Turkey’s market is closer to the Old World and it serves as a bridge between Europe and Asia and it has being working in the field of petrochemistry for 40 years.
What all investment plans are lined up in your corporate itinerary of near future?
Investments can be divided into several parts. One of them is funds to be invested by SOCAR-Turcas in the construction of the oil refinery. Petkim has allocated 130 ha area for a petrochemical refinery. Construction of the refinery at Aliaga will enjoy a cost advantage of approximately 30% compared to Greenfield investment due to existing infrastructure. Integration with the new refinery will provide Petkim with raw material availability and increased efficiency by creating synergy between petrochemical and refining assets.
In addition to refinery investment, in mid-to-long term, Petkim should realize its growth plan on the quadrangle of upstream investments, downstream investments, energy and logistics in order to be a regional force in petrochemicals and to reach its target of domestic market share of 40% by 2018 as stated in the company vision. With these investments we intend to meet about 40% of domestic market share, as well as to sell some portion of production at the European market and together with the production to convert Petkim into the centre of logistics.
Investments into the port and spheres of support of logistics of concern also are planned. We will enlarge our port, to make it one of the largest sea gates of Turkey both from the point of view of trans-shipment of containers and dry and liquid cargoes. Only in 2009 some $5mln will be invested into the port. Besides this we deal with commercial activity. We plan to buy raw material abroad and sell in Turkey, not produced by Petkim. After the completion of all works Petkim will become the largest production complex of Turkey and leading in Europe.
How would you word on environmental footprint of Petkim?
PETKIM is an environmentally sensitive company in all production activities, raw material usage, technology, operational and management facilities. We aim to be a model “environmental friendly company” by environmental protection facilities like responsible care program applications, waste treatment plants, pollution monitoring and controlling facilities, energy and resource conservation, waste reduction, environmental investments, inside and out site environmental training activities and supporting the national and international studies on sustainable development issues.
Our company progress in institutionalization of environmental activities. PETKIM strengths its environmental performance with pollution control facilities like The Wastewater Treatment Plant, The Hazardous Waste Incinerator, dispositions for emergency response and environmental accidents etc. as well as its integrated management system including environmental issues at each stage of company activities. We are aware of that and make the necessary environmental investments in spite of high costs like the modification project of Steam and Power generation Plant of PETKIM with 88 million $ completed in 2007. This project allows using natural gas in boiler instead of fuel oil and it is expected to decrease in CO2 emission at 32% and SO2 emission 99%. In near future we are planning to establish The OHSAS-18001 and ISO-14001 management systems (Including Risk Assessment Matrix- RAM). Furthermore for soil remediation it is planned to establish the degree of groundwater contamination at the site which is prepared a risk base report and then develop a remediation plan for most toxic materials.
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