2021 - 2022 Paints and Coatings Industry Review

Turkcoat Magazine Features Sector Professionals' Assessment of the Paints Industry

Chairman of the Paint Manufacturers Association (BOSAD) - M. Akın Akçalı

The Turkish paints sector is a highly significant industry that has achieved international standards through its production quality and capabilities, and exports to numerous markets worldwide. Beyond being the 5th largest paint producer across Europe, our country is advancing toward becoming an international sectoral force in its region through increasingly growing production and technological infrastructure. As the Turkish paints sector, we control approximately 2% of the global 164 billion dollar paints and coatings market. Close to 20 large-scale enterprises operating at world standards in production and commerce, along with numerous medium and small-sized enterprises, are active in the sector. During the pandemic, supply chain and logistics problems elevated Turkey's geopolitical position in importance for global markets. The Turkish paints sector increased its exports during this period, with major concentrations in Iraq, Uzbekistan, Iran, Russia and Egypt. According to İKMİB data, our sector, exporting to 168 countries, achieved 871 million dollars in export revenue in 2020. In 2021, with growth exceeding 27%, total sectoral exports surpassed 1.1 billion dollars. Growing public awareness regarding environmental and human health protection, technological advances and new regulations have brought innovation and responsibilities across diverse product portfolios in human health and environmental matters. In recent years, the paints industry has recorded significant developments in recovery and transformation alongside the process of complying with environmental regulations. The biggest obstacle facing our sector, which is so strong and has high potential, is our dependence on imports in raw materials. This situation increases our costs on one hand, while negatively affecting the added value that our sector could provide to the economy. Raw material supply is among the most important factors binding our manufacturers' hands. In this regard, it is highly important that petrochemical facilities—designed and implemented under state leadership to meet the raw material needs of dozens of sectors alongside the paints sector—be planned and implemented. Such facilities are large-scale projects requiring massive investments. Petrochemical facilities supplying raw materials to dozens of sectors are not important only for our sector. They are of great importance for the country's economy as well. They would also prevent the billions of dollars in current account deficit we incur within a year. On the other hand, one of the basic problems we face is the high financing costs for our companies that conduct exports and compete with other paint producers worldwide. Our competitors abroad can invest by borrowing at much lower costs than our domestic producers. Solutions regarding credit costs should be developed to strengthen the hand of our exporting manufacturers against their competitors. For our industrialists, every step taken in raw material and financing is of great importance. This year, the effects of the pandemic will continue to decline. On the other hand, the Russia-Ukraine war will have a negative impact on Turkey's economy, which has intense commercial relations with both countries and has been going through a difficult period domestically. Currency fluctuations continuing from last year and increases in paint prices have led to reduced consumption. I believe there will be some contraction particularly in the construction paints market.

CASE Rubber and Plastic Additives EMEA Sales Manager - Halil Kuzucu

After 2020, which was turbulent for the entire world, 2021 began as a year when we expected normalization to start for the chemical industry. In both our personal and business lives, we aimed to return to our old normal through controlled socialization, and especially from the 3rd quarter of 2020 onward, as market activity began, we saw production reach or approach full capacity. Following this favorable climate, unfortunately the chemical sector's supply chain and logistics, among other general issues, were affected by regional situations such as the Suez Canal and the labor crisis following Brexit. The resulting raw material shortage created not only unease in the chemical sector but anxiety and partly panic in many sectors. Following this supply shortage, demand growth that exceeded expectations made the sector focus more on purchasing and production planning than on sales. As in many sectors that had not previously experienced such a degree of global imbalance (such as the chip crisis in automotive), our sector also could not adequately meet demand. This supply-demand imbalance created an inflationary environment worldwide and particularly in our country, as expected. Especially after the second half of 2021, following very serious increases in main inputs such as energy and oil, our sector faced not only supply constraints but also the need to achieve price balance. Due to the chemical sector's high import dependence, costing and pricing—especially from the second half of 2021 onward—became a very serious matter, and emerging exchange rate risks began to impede healthy trade. On the other hand, the chemical sector continued to increase its export growth trend from recent years; ending 2021 with an export figure of approximately 25 billion dollars, the sector broke a very significant export record. Many producers attempted to take export steps and find new markets to maintain the exchange rate risk balance between purchasing and sales. To summarize, following events and situations that unfolded contrary to our expectations and triggered one another, I can say we went through a year in which we attempted to manage a supply market that could not keep up with growing worldwide demand, but nearly all companies accumulated significant profits on their balance sheets. As UnivarSolutions, we succeeded in delivering high-quality products to our customers in the sectors we serve under the most favorable service conditions possible despite these severe supply difficulties, and we continued healthy growth with the new sectors we began serving and our new suppliers. For 2022, demand will be the fundamental parameter and control point for our company. We do not believe that merely conducting sales and profit analysis is a healthy management approach for companies; we need to conduct close monitoring of sub-breakdowns such as quantity sold, number of customers, number of industries served, and number of products sold to a customer compared to previous years and budget. Furthermore, we must closely monitor the reflection on demand of our country's fragile foreign exchange situation and constraining high interest rates and high inflation environment. To become our country's leading raw material supply firm, with the new projects and new suppliers we will announce in the coming days, we will be a trusted provider for our customers.

Asil Kimya Sales Director - Ali Karamustafaoğlu

We closed 2021 with significant growth in foreign currency terms despite the difficulties brought about by the pandemic. In 2022, we want to sustain the same growth by continuing to develop ourselves within the criteria we have set. As we celebrate our 35th year, we are a company that guides our sector and has earned a place in our customers' hearts through our pre-sales and after-sales services. With our 16-person sales team working in every region of Turkey, we manage Turkey's most active field sales operation. Our sector, particularly over the last two years, has faced difficulties due to product supply problems and price increases. Like last year, this year we want to minimize the impact from supply chain problems and continue product supply continuity. We continue to present our broad product portfolio in the paints and coatings group to our customers. By striving to maintain the optimum point in the quality-price balance, we are expanding our product portfolio. As of 2022, our cooperation with Nouryon has begun and we have started sales of Bermocoll in paints and construction chemicals and cellulose groups. I believe this cooperation will strengthen us and our sector. The chemical sector achieved significant success in 2021, particularly in the export area through rapid growth. In the new year, hoping that the impact of the pandemic will also decline, I believe this success will continue. If we can develop ourselves as a sector in high value-added areas, I believe this momentum created recently will bring sustainable growth and contribute to our country overcoming the threshold. I wish 2022 to be an auspicious year for our country and sector. Asil Kimya has been by our customers' side for 35 years and will continue to be.