By John Richardson
TURKEY has long been a useful barometer of the overall health of the global polymers industry, especially polyolefins, because of its heavy dependence on imports (see the slide below, courtesy of Ali Murat Ayar – managing director of Say Polymers, the Amsterdam-headquartered global polyolefins trader and distributor with operations in Turkey).
If external markets are weak, global producers seek compensation in Turkey, resulting in very competitive domestic pricing, as has been the case for most of this year, largely because of events in China. And, of course, the reverse occurs when the overall supply and demand balance is good.
But now the worry is that domestic demand in Turkey itself will take a hit as a result of political unrest – and thus will become less of a useful sink, or escape valve, for excess volumes.
As the second slide below shows, which is again from Say Polymers, what is at stake is very stable and consistent demand growth over the last 11 years.
“The Turkish economy depends a lot on external finance and capital flow,” said Emre Deliveli, an economist and columnist for Istanbul’s Hurriyet Daily News, in this International Business Times article.
“If the hedge funds get spooked and they get out of Turkey, the economy is going to crash.”
This FT Beyondbrics blog post provides some useful further detail.
The summer tourist season, crucial for the Turkish economy, is also almost upon us. Tourism generates more than $20bn in revenues.
Perhaps it is, therefore, good news that Prime Minister Recep Tayyip Erdogan is out of the country, given that some of his recent comments have been somewhat inflammatory.