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Turkey's recycled market hit hardest by lira's freefall

by Başak Ceylan - bceylan@chemorbis.com
  • 30/11/2021 (03:10)
The headwinds have been rippling through the Turkish recycling industry for some time, the recent of which has been the sharp depreciation of the Turkish lira. As scrap and flakes are traded in dollars and euros, and the end-product is sold in Turkish lira, recyclers have come under a heavy strain and the relative competitiveness of recycled polyolefins has suffered.

Logistic snarls squeeze supply in recycled markets

Pandemic and the ensuing logistics complexities were the first and foremost obstacles that Turkey’s recycling industry faced. As the pandemic unfolded, the international transport and logistics were hit deeply, with strained supply chains causing longer lead times for orders and increasing costs.

However, these were not only obstacles the industry faced during those challenging times.

In May 2021, Turkey’s Ministry of Commerce prohibited ethylene polymer waste imports. The decision came only eight months after the Ministry of Environment and Urbanization reduced quota for scrap plastic imports was from 80% to 50%.

Short-lived ban weighs heavily on tight market

Although the ban was on ethylene polymer waste imports, the following circulars published by the Ministry showed strict measures for importing other wastes. In addition to a waste import registration certificate, the Ministry also obliged companies to submit a 3-year letter of guarantee, calculated as TRY100 per annual production in tons. The companies also faced the threat of cancellation of their registration documents if their imports were found to contain more than 1% of foreign matter.

After nearly two months of discussions, the ban was lifted and “effective inspection” criteria were announced in July 2021. Following the introduction of the new criteria, recyclers were obliged to meet the specified technical conditions and to renew their waste importer registration documents.

Elevated costs bite into sellers’ margins

Despite the lifting of the ban, importing activities failed to show a great rebound, as most traders felt uneasy with the new regulations and also with the ongoing logistic challenges. Elevated freight and container costs, as well as tight conditions in the European markets, were also among reasons hampering import activities.

A historic decline in the value of the Turkish lira has contributed to weak buying interest in Turkey’s recycling market. This is because scrap and flakes are traded in dollars and euros, and the end-product is sold in Turkish lira. Costs surged as an 11-day slide put the Turkish lira’s year-to-date loss at nearly 40%.

In addition to currency fluctuations, sellers’ ability to keep prices in level with demand has also been diminished amid firm raw material prices and increased operational and utility costs.

November pricing has ballooned

“The cost of scrap HDPE rose by more than 20% in nearly 20 days,” a trader reported while another trader, who reported massive cost-driven hikes for R-PET Flakes, asked: “Garment industry should be preparing for the new season and buying activities should increase in theory. However, will end-users be able to afford those inflated levels?”

“The domestic scrap availability has been a concern ever since the first ban on imports.

Although imported scrap is now allowed under stricter regulations, not many recyclers are willing to take the risk yet. The ever-changing parity is a major concern for all of us now," a recycler noted.

Recyclers under increased pressure

For the recycling industry, the foremost concern and focus remains the rout in lira and its impact on Turkey’s economy. Turkish recyclers are likely to struggle with maintaining a competitive edge in a cost-sensitive market, with virgin materials trending lower. Although expectations are still vague, December is largely expected to be another month of firmer prices, not only because of economic uncertainties, but also of the ongoing tightness in availability.

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