Organic Pigment Use in Turkey

Organic Pigment Use in Turkey

Abstract

Turkey, consuming approximately USD 120 million worth of organic pigments, maintains a significant coatings sector. Many industries, including inks, plastics and paints, utilise these pigments. Although organic pigment consumption in Turkey has occasionally declined, it has shown average annual growth of around 14 percent. However, this growth rate was higher during the 2000-2010 period but has fallen to around 6 percent over the past 10-11 years. Whether this slowdown indicates market saturation remains debatable.

Turkish Organic Pigment Imports

First, I must emphasize that the annual import figures cited here and their changes have been obtained and evaluated through TURKSTAT's Foreign Trade Statistics page. Structural changes at European firms and sector usage rates are based on my 30 years of professional experience in this sector with ÇBS, CIBA, BASF and Sudarshan. The percentages can vary plus or minus and may change according to the years. Actual figures can only emerge through knowledge of each user's consumption, but I believe this is not only impossible but also impractical. Turkey's organic pigment imports, as shown in Figure 1, grew at an average rate of 14 percent between 2000 and 2021, rising from approximately USD 30 million to nearly USD 120 million. Organic pigment consumption has shown fluctuations in line with the country's economy, experiencing ups and downs from time to time. Organic pigment imports fell at the highest rate during the 2001 economic crisis, while similar but smaller contractions were recorded in 2008 and 2009. These secondary downturns were clearly linked to the global crisis experienced worldwide. Despite these declines, organic pigment consumption showed increases exceeding 50 percent in some years, particularly following the 2001 crisis. In the second 10-year period, that is between 2011 and 2021, the growth rate slowed considerably compared to the first decade and remained at an average level of 6 percent. After 2010, small declines were recorded in 2012, 2015 and 2018. Organic pigment demand appears to have entered an upward trend again from 2018 onwards. Upon detailed examination of 2021, the year in which organic pigment imports peaked, it was observed that organic pigment imports slowed considerably in the second half of 2021. Despite the contraction in the second half of 2021, demand for organic pigments has risen again in the first half of 2022. It is believed that the increase observed particularly during the COVID-19 pandemic is linked to increased demand for colorants used in the composition of inks and plastic packaging materials, as people shifted to online shopping and packaged products in direct purchases, thereby increasing demand for packaging materials. Upon examination of import statistics, it is believed that imports by some major pigment users are incomplete. These users of organic pigments not visible in import statistics must be firms located in free zones, since products brought to these zones are not counted as imported into Turkey. Since some of these firms' products are shipped to other countries and some enter the country as products with different tariff codes, it is impossible to determine which firms use organic pigments in what quantities. Moreover, when examining organic pigment imports on a country basis, considering that some countries from which organic pigment is imported do not actually produce organic pigments, there is clearly uncertainty about what these imports actually are. For example, imports from Romania, which have been increasing continuously since 2016, are likely to be not pigments but products such as pigment-containing masterbatch. Additionally, we believe that some imports may involve incorrectly entered customs tariffs. Imports from some countries, such as Sweden, Norway and Israel, are thought to actually be intra-company movements of global firms located in those countries, or idle pigments remaining in those countries being purchased by various firms and brought to Turkey. Until 2000 and even up to 2010, Turkey's source of organic pigments was primarily European countries, particularly Germany. The main market leaders of these years were Ciba, Clariant and BASF, whereas from the early 2000s onwards, particularly Chinese organic pigment producers and similarly India-sourced producers were observed to increase their market shares. Imports from China, in particular, as shown in Figure 2, have increased approximately tenfold since 2000. During this period, Indian firms, lagging behind China, increased their share in imports approximately fivefold, as seen in Figure 3. Between 2000 and 2010, Chinese-source pigments were concentrated heavily in yellow and red groups by weight; Indian-source pigments were concentrated heavily in blue and green colour groups. Between 2000 and 2010, organic pigment procurement from countries, particularly Germany, where Ciba, BASF and Clariant factories were heavily concentrated, showed an increase of approximately 50 percent by value, while the overall increase is 250 percent with the shares of Chinese and Indian firms.

The End of Giants

Organic pigment technologies were developed by European chemical giants, primarily Swiss and German firms. The most important of these firms were Ciba-Geigy, Sandoz, Hoechst, BASF and ICI. Of these, ICI withdrew from the market first. Ciba-Geigy, a source of pride for Switzerland, was in a strong position thanks to its patents. Sandoz was in a way a sister firm. Germany's giants Hoechst and BASF held significant market shares. However, pigment patents were beginning to expire and organic pigment producers were emerging in China and India. In the 2000s, Chinese and Indian firms' share in Turkey's market was only around 20 percent each for the amount of pigment supplied by Germany. This situation was similar worldwide. Chinese and Indian firms experiencing serious quality problems and operating at low capacity were seeking to close their weaknesses, and as years progressed they improved their product quality and standards. European firms' organic pigment shares in Turkey began to experience ups and downs and their market shares entered into continuous decline. Besides, the pharmaceutical industry was also experiencing difficulties. Significant shares of Ciba-Geigy and Sandoz were held by Swiss banks and institutions, and these institutions decided to separate the pharmaceutical groups of Ciba-Geigy and Sandoz and unite them under one roof, primarily to support and protect the pharmaceutical industry. The pharmaceutical groups were merged under the name Novartis, while the specialty chemicals and pigment groups were restructured as Ciba Specialty and Clariant. At one point, the possibility of these two firms coming together under the Clariant umbrella was also on the agenda, but the merger was abandoned as competition authorities did not approve it. However, shortly after this failed merger attempt, Hoechst proceeded to merge with Clariant under the Clariant umbrella. A short time later, the Ciba Specialty name was simplified and registered as Ciba. Meanwhile, Ciba divested its mixed metal oxide portfolio to FERRO and withdrew from this sector. The leading organic pigment producers in Europe are now Ciba, Clariant and BASF. In the second half of the 2000s, Ciba also divested its Maastricht facility where it produced inorganic pigments to DCC and withdrew from the inorganic pigment market. By the end of the 2000s, Ciba was completely transferred to BASF and withdrew from the market entirely. However, this CIBA-BASF merger did not prevent the decline, and BASF continuously lost market share. Towards the end of the 2010s, BASF separated its pigment division from its main structure, converting it into an independent unit, and then proceeded to transfer the pigment division to Sun Chemicals, the world's largest pigment producer. Despite Sun being the world's largest organic pigment producer until this merger, it remained limited in Turkey, serving primarily its own ink factories. Meanwhile, a similar reorganisation occurred at Clariant, and Clariant's organic pigment division was restructured under the name Colorant International. Colorant International was recently transferred to Heubach, a German-Austrian sourced firm. Throughout these developments, these European giants, continuously losing market shares, made investments and acquisitions in China and India, hoping to compete with Chinese and Indian firms, but these hopes unfortunately proved futile and were insufficient. Now, two Western-sourced organic pigment giants face us as Sun Chemical and Heubach. Meanwhile, a smaller-scale restructuring took place at Capelle and the firm was integrated into Ferro. As another European firm, Synthesia has maintained its presence in the Czech Republic and has even managed to increase its relative market share in Turkey's market.

Growing Far East

Although the largest sources in the Far East are China and India, Indonesia, South Korea and Japan are also seen to supply significant amounts of organic pigments to Turkey. When analysing Chinese sources supplying organic pigments to Turkey, it is observed that the majority of these sources are not direct producers. Indian-sourced firms can be said to be predominantly producers. It is currently observed that firms supplying organic pigments from India are predominantly blue and green producers; however, some firms, notably Sudarshan Prasad, are seen to have entered red and yellow groups and even violet production. European, particularly German-sourced, organic pigment imports increased 170 percent overall while declining around 15 percent. The biggest loss outside Germany is seen to have occurred in the United Kingdom, resulting from the closure of Ciba's Paisley unit in the United Kingdom following its merger with BASF. British-sourced organic pigment supply of around USD 8 million has declined to levels of USD 0.2 million. Similar declines are observed in Belgium, France, Netherlands and Spain-sourced organic pigment supplies, while increases are only seen in the Czech Republic where Synthesia is located. Apart from the Far East and Europe, the United States is seen as a notable organic pigment supplier. Although US-sourced organic pigment supply shows ups and downs, it has maintained its level but has in no way kept pace with the market's growth rate. Accordingly, we can say that the US's organic pigment market share in Turkey has declined. [caption id="attachment_144462" align="aligncenter"] Figure 4 shows the distribution of organic pigment consumption by sector.[/caption] Based on 2021, when examining which sectors import organic pigments and in what proportions, it is observed that the largest consumption is in the ink industry. Nearly 40 percent of total imports is directly realised by firms that are ink manufacturers. When considering that part of distributors' imports also go to the ink industry, it is not far wrong to argue that the share of organic pigments used by ink producers approaches 45 percent of the total share. Before the 2000s, Turkey's ink industry consisted essentially of domestic producers such as DYO Ink, ÇBS Printaş, Samo and Bakim, while today this structure has shifted over 90 percent to international organisations Sun, Siegwerg and Toyo. However, a limited number of domestic small ink producers remain. Distributor firms are the 2nd largest organic pigment importer. Their share is at the 25 percent level within total imports. Although distributor firms predominantly serve small and medium-sized organic pigment users, it is also observed that large firms, when squeezed, utilise these sources. Therefore, while distributor firms primarily serve paint, plastic and ink producers, pigment paste producers and textile firms also receive pigments from them. It is quite difficult to state their net shares. Turkey's masterbatch industry is the 3rd largest organic pigment user. The largest service sector for Turkish masterbatch industry is the filament industry, which is why the major firms in this sector are observed to be concentrated in Gaziantep. It is also clear that the share of global firms is increasing in this sector. Among these, Avient, Tosaf and Plastika Kritis (Senkroma) hold significant market share, while the sector's domestic leading firms are Vira Color, Kolortek, Aksa and Gülsan. The number of producers in the plastics industry is observed to be approximately 30. It is projected that the proportion of organic pigments used in the plastics industry exceeds 20 percent of total imports. One of the important users of organic plastic pigments obtained from distributors is seen to be synthetic leather manufacturers. However, whether the synthetic leather sector should be classified in the plastic group is a matter for debate. It would not be wrong to claim that the plastics industry's total organic pigment consumption is 25 percent of total imports. Turkish Paint Industry has managed to rank only 4th against the number of existing paint producers, with direct organic pigment imports projected to be below 10 percent, which is less than half of masterbatch industry consumption. It is estimated that with the total number of producers expressed in hundreds, there are nearly 500 small and medium-sized paint producers serving this sector. Turkish paint industry has also shifted increasingly towards global firms over the last 20 years. A giant such as ÇBS from this sector has withdrawn from the market. At present, the largest global firms in this sector are Kansai and Nippon. The share of high-performance pigments in these firms' production has also declined significantly. Until the mid-1990s, the OEM paint needs of the automotive industry, protected by tariff walls, were met by the giants of the time such as ÇBS, DYO and Kemipol, whereas now pigment dispersion-initiated OEM paint production in the country has almost ceased and OEM paints are produced by pigment pastes supplied through imports. As a result, customs tariff numbers changed, high-performance organic pigment imports fell, and this reduced the paint industry's pigment consumption share. The largest segment of Turkish paint sector is construction paints, followed by industrial paints. Paints produced in the construction sector have largely shifted to water-based systems, so it is observed that pigment pastes are predominantly used here, and a significant portion of this is supplied through pigment paste producers. The 5th largest organic pigment user sector is the pigment paste producers sector. Since the important part of this sector's end-user is in the paint sector, as also stated above, its treatment as a separate class may be debatable, but it is beneficial to treat it separately as these firms also serve other fields such as textiles and even synthetic leather industry at the same time. It is thought that pigment paste producers' organic pigment imports have a share of around 4 percent. The 6th largest organic pigment user sector is powder coatings. Whether this sector should be evaluated in paints or plastics has always been debatable. Therefore, I find it appropriate for powder coatings to be treated not as paints or plastics. This sector's visible share is around 3 percent. However, since Akzo Nobel Paint in Izmir is located in a free zone, the exact amount of organic pigment it uses is not known. Again, considering that JOTUN has powder coating production as well as wet coating production, it is not clear in what proportion its imports are used by wet coatings. If Jotun, IBA and some other powder coating producers are considered to source from the domestic market, that is from distributors, powder coaters' organic pigment consumption is thought to be at most 5 percent. The 7th sector is the seed industry. In the seed industry, seeds are coloured to prevent consumption of treated seeds. Organic pigments used in seed colouring are not counted as domestically sourced. This is because all seed colouring firms that realise external imports undertake during import that the organic pigments they import will not be used in food, agriculture, pharmaceutical and similar fields. Apart from these 7 classified sectors, the textile industry also uses organic pigments, but determining the exact amount is also difficult. Since the textile industry uses a large proportion of dyes in colouring, pigment consumption occurs in specific areas.

Conclusion

As stated earlier, although Turkey's organic pigment consumption has experienced some contractions since 2000, it is observed to have increased significantly. Until the early 2000s, the main suppliers were European-sourced firms, but these firms' shares showed continuous decline in subsequent years. Particularly China, followed by India, has become Turkey's most important source of organic pigments. The main sectors using organic pigments are inks, plastics and paints industries. Secondary sectors including powder coatings, pigment paste and textiles can be added to these main branches. Since there are many small and medium-sized pigment user organisations in Turkey and these firms have limited financial capacity for foreign imports, a significant portion of pigments is brought to the country by pigment distributor firms. Therefore, distributor firms act as important financiers while feeding the sectors largely on open account and credit terms.     Assoc. Prof. Gürses Öner Regional Sales Manager Sudarshan Chemical Industries Ltd.