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Restriction on shopping bags exerts pressure on PE demand in Turkey

by Merve Madakbaşı - mmadakbasi@chemorbis.com
  • 18/01/2019 (09:54)
Turkish PE players reported to have felt a visible impact of the restriction on the use of plastic bags on PE trade although it has been only a few weeks since the compulsory fee of TRY0.25 was implemented by the Ministry of Environment and Urban Planning.

Fees on plastic bags came into effect on January 1st

The implementation exempted thin plastic bags used for loose bulk items such as fruit, vegetables and baked goods. Single-use carrier bags used for the containing meat and fish were also exempted from the charge.

Ministry: Manufacturing has fallen by 50%

According to local media reports, consumption has contracted by around 75% at some market chains in the first two weeks after the implementation. This was naturally followed by a decrease of 50% in the manufacturing of plastic bags.

Turkey’s total plastic bag consumption was around 30-35 billion per year, according to Mr. Murat Kurum, Minister of Environment and Urban Planning. “We aim to reduce the annual consumption 440 per person in 2018 to 90 per person in 2019. Our target for 2025 stands at 40 per person,” he stated.

PAGEV: Industry needs a transition fund

On January 15, PAGEV (Turkish Plastic Industry Foundation) gathered almost 200 representatives from packaging companies and evaluated the possible results of the new implementation in the near and medium term.

“11,000 companies employ around 250,000 people in industry, while Turkey ranks as the second largest bag manufacturer in Europe following Germany and the sixth largest market across the world,” President Yavuz Eroglu said during his opening speech.

Eroglu pointed to the challenges faced by the companies that invested in the manufacturing of plastic bags in the last years, blaming a fast transition period. “The affected firms should be supported by a fund as well as a stimulus package that includes grants, non-refundable loans and debt restructuring,” he added.

ChemOrbis takes soundings during PAGEV’s meeting

Manufacturers pointed to the pay-back period of their machines, which is roughly considered as five years. “This means a new investment would result in a lack of benefit based on lower demand for bags. Some companies halted production while around 1000 employees have lost their jobs so far in the industry. Moreover, we are set to cope with pressure from banks amid difficulties in receiving loans when the market is contracting,” a company representative lamented.

All plastic bags will be required to have barcodes starting from end March, while several stores with stocks without barcodes are facing a stiff pressure. A manufacturer noted, “Markets and retailers are trying to return their existing stocks to manufacturers, hence.”

PE sellers and converters express opinions on possible results

Some players were not much concerned about reduced consumption of plastic shopping bags as they counted on their other business items. The majority of participants wait to see a more clear impact of the recent implementation on the PE market, whereas many converters have already complained about their depressed end demand following the new charge.

Packagers, meanwhile, concurred that the fees have weighed on activity, particularly for HDPE film and LLDPE. “The extent of the impact will probably be clearer after a couple of months,” one stated.

Bag manufacturers are likely to seek alternative products although this won’t be easy. “It would be hard for a bag maker to shift its production to trash bags due to machinery differences. Turkey does not show a large potential for fresh investments over the coming term as the elections in March as well as the fluctuations in parity keep them cautious,” argued a buyer.

Will it reflect on PE prices?

Early projections do not hint at dramatic downward adjustments on PE prices. This is because demand for PE has already not been brilliant since last year in the midst of economic struggles stemming from tight liquidity and high interest rates.

A source from a Middle Eastern PE producer noted, “Our PE sales were not affected as we mostly sell medium high density polyethylene which can be used in applications other than bags. Moreover, we expect to see a recovery in the market following the New Year holidays in China.”
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