AN OVERVIEW OF 2020

2020 was a dismal year marked by the global economic contraction from the Covid-19 pandemic which started to impact the world in March. In this challenging environment, Şişecam Chemicals stood out among its competitors in similar sectors thanks to its sustainability-centered focus on production, quality and sales consistency.

Developments in the soda sector

All of the customer segments were impacted by the global slowdown caused by the Covid-19 pandemic. The construction and automotive industries were especially affected by the restrictive measures taken to combat the pandemic. The flat glass sector faced reduced demand in the early part of the outbreak. Strong demand recorded in the glass packaging market until the end of April was replaced by contraction during the rest of the year due to the ongoing slowdown in tourism and other service sectors. This contraction was also reflected in the demand for glass packaging products, especially in the soft drinks and alcoholic beverages sectors. Robust demand in the powder detergent sector during the first half of the year softened in the second half of the year due to rising inventory. Demand for sodium bicarbonate, a product commonly used in the food and feed sectors, remained steady throughout the year.

In 2020, global demand for soda decreased by 10-15% compared to the prior year. World trade figures provide insight into demand for soda ash. Global export figures of exporting countries dropped for the year, except for China which grew by 2%. The global decline in demand was also reflected in imports. India, one of the world’s leading importers of soda, imported 30% less soda compared to 2019. Meanwhile, soda imports of Brazil and the EU decreased by 8% and 11%, respectively.

In Turkey, soda demand from the glass industry dipped below levels seen in recent years due to the pandemic-related contraction in the construction and automotive sectors in 2020. The reduction in the textile industry due to the restrictive measures taken during the pandemic, also caused a decline in soda demand. In the powder detergent sector, health and hygiene concerns due to the pandemic meant higher demand during the first half of the year; however, demand returned back to normal levels in the final months of the same period. Demand in the soda sector remained stable in the latter half of the year. Meanwhile, demand from the food and feed sectors, major consumers of sodium bicarbonate, rose in the first half of the year due to the pandemic effect, but reverted to normal levels the remainder of the year.

Developments in the chromium chemicals sector

In 2020, demand from the domestic and foreign leather and metal plating industries, in addition to many other linked sectors that use chromium chemicals as an input, was negatively affected by the Covid-19 pandemic. During the year, the chromium chemicals market contracted 20% due to the negative effects of the pandemic. As a result of the highly varied restrictions imposed by different governments around the world, 2020 was a year where strategies had to be modified quickly and sustainable service quality played an important role. Restrictive pandemic related measures had a negative impact first on China at the start of the year. Subsequently, Europe and Turkey were affected by lockdown measures, followed by the Americas in the second half of the year.

ACHIEVEMENTS IN 2020

In 2020, soda business line recorded soda product sales to 81 countries with its three production plants.

Despite reduced and unstable demand in parallel with increased competition, Şişecam Chemicals maintained its presence in the markets, penetrated new markets and gained new customers with its strategic interventions. Service quality was improved by offering a range of logistical options that could provide competitive advantage. In addition, Şişecam Chemicals engaged in efforts to boost customer satisfaction.

Compared to international competitors, Şişecam Chemicals’ soda production facilities are differentiated with their rich resources of raw material, effective energy management, high production quality and exceptional operational efficiency. The Company’s plants in Mersin and Bulgaria are near port facilities. This close proximity to major shipping hubs ensures that logistics costs are lower than other producers that sell to developing countries. As a result, Şişecam Chemicals can readily export to a large part of the world. Providing a clear logistical advantage with its location near strategic customers, the Bosnia & Herzegovina plant efficiently serves Europe, the largest soda market after China. Thanks to this advantage, Şişecam’s Soda Lukavac plant became the third largest export company in Bosnia & Herzegovina in 2020.

Şişecam Chemicals benefits from synergy with production facilities in three different geographies. Şişecam Chemicals has the capability to offer diversified supply options. This configuration ensures an uninterrupted supply by protecting Şişecam Chemicals from potential political and environmental risks. As a result, Şişecam Chemicals is preferred by corporate soda customers around the world.

In 2019, Şişecam Chemicals entered into a production partnership featuring an equal shareholding structure with Imperial Natural Resources Trona Mining Inc., an affiliate of Ciner Group, in the Green River region of Wyoming, USA. The agreement foresees an annual production capacity of 2.7 million tons of natural soda, including 2.5 million tons of soda ash and 200 thousand tons of sodium bicarbonate. These annual production figures are based on using solution mining. In 2020, Şişecam Chemicals worked further on this investment and commenced analytical studies of sales and logistics scenarios.

The US investment allows Şişecam Chemicals to produce natural soda by using the most advanced techniques in the low-cost solution mining method. As a result, the new enterprise will play a major role in expanding Şişecam Chemicals’ share in the global market. The Wyoming investment will also bolster Şişecam’s presence in key markets such as Asia and the USA.

Once this facility is operational, Şişecam will rank among the top five players in the world in soda ash production. The USA investment will provide Şişecam with a competitive advantage in accessing low-cost natural soda in the soda market, which is intensely competitive. In addition, the new venture will make a positive financial contribution to Şişecam Chemicals by strengthening its power in the global soda market. The natural soda investment is expected to be finalized and initiate production by 2024. The exact timing depends on the date when required business permits and operating licenses are obtained.

The same production partnership structure that Şişecam established for this project has been successfully operational for years in Bulgaria with Solvay, one of the largest producers of synthetic soda in the world.

The highly challenging environment caused by the Covid-19 pandemic during the year adversely affected many sectors of the global economy, including those using chromium chemicals as an input. Despite difficult and volatile commercial conditions in 2020, Şişecam Chemicals minimized the impact of the pandemic by focusing on diversified regions thanks to its extensive sales network.

For the BCS product, an input used in the leather sector, Şişecam Chemicals focused on Central and South America, where are the strategic markets, and boosted sales volume to this region by 6.7% compared to the previous year. While domestic demand for BCS declined in 2020, Şişecam Chemicals maintained its share of the domestic market.

The contraction in the automotive sector negatively affected the metal plating sector as well as demand for chromic acid, used as an input in this sector. However, Şişecam Chemicals maintained its share of both domestic and foreign markets.

The pharmaceuticals and pigments sectors, major consumers of sodium bichromate, were affected by adverse market conditions to a relatively lesser degree. Şişecam Chemicals focused on expanding the customer portfolio and posted a 53% increase in sales volume compared to the previous year.

Şişecam Chemicals conducts chromium production and sales in Italy, sales in China and production at Mersin Kromsan Plant in Turkey, its main facility in this segment. In 2020, the Company generated 88% of its chromium sales revenues from international markets. Şişecam Chemicals Kromsan Plant maintained its pioneering position in its business segment in 2020. The facility boasts advanced production technology, high capacity utilization rate, product development activities, continuous high-quality production capability, widespread sales network and high environmental standards.

Cromital S.p.A., Şişecam Chemicals’ subsidiary in Italy, manufactures and sells BCS in liquid and powder form. It is the market leader in Italy, Europe’s biggest leather processing centre. The Company also enjoys a key position in the European market for chromium III chemicals, a product developed for the metal plating industry, as well as liquid chromic acid and liquid sodium bichromate. Cromital S.p.A. is the only factory in Italy to have received a permit for treating and recovering chromium from effluent water generated by the metal plating industry. As a result, the Company contributes to environmental protection efforts.

Highlights from 2020 investments

Şişecam Chemicals bolstered its operational performance with its continuous improvement strategy. Infrastructure development efforts are underway across the entire organization. During the year, Şişecam Chemicals carried out projects to achieve operational excellence, increase efficiency and implement sustainable production practices. In addition, work moved forward on marginal capacity increases at its current facilities with a focus on growth. In 2020, Şişecam Chemicals focused on effective use of resources due to the impact of the Covid-19 pandemic and reviewed its capital investments. Şişecam Chemicals recorded investment spending of about TRY 225 million in 2020.

In 2020, Şişecam Chemicals continued its capital investments in its brine facility to provide sustainable raw material supply to Mersin Soda Plant. As part of the operational excellence focus, modernization works at Mersin Kromsan Plant were carried on. Şişecam Soda Lukavac Plant in Bosnia & Herzegovina carried out projects on energy, process efficiency and waste management throughout the year.

SUSTAINABLE AND ENVIRONMENT-FRIENDLY PRODUCTION

As a major exporter of soda and chromium products, Şişecam Chemicals fulfilled its obligations under European Union REACH (Registration, Evaluation, Authorization and Restriction of Chemicals) Regulation No. EC/1907/2006 in 2020.

The chromic acid authorization process, ongoing since March 2015, was successfully completed during the year. The authorization decision was officially issued by the European Chemicals Agency (ECHA) effective from December 18, 2020. The authorization is valid for five areas of use.

Pre-registration of all products and supplied chemicals was completed in accordance with the Regulation on Registration, Evaluation, Authorization and Restriction of Chemicals (KKDİK/Turkish REACH), published in the Official Gazette dated June 23, 2017, and numbered 30105 (in duplicate).

In 2020, Şişecam also completed preparations to fully meet all of its legal obligations under the UK REACH Regulation to be put in force in the United Kingdom as of January 1, 2021 due to Brexit.

Having a wide chromium chemicals market in South Korea, Şişecam continued its efforts to register its products under the Korean REACH in 2020.

Şişecam Chemicals conducted its management system activities to ensure the well-being and safety of the environment in addition to its employees and customers.

In 2020, Şişecam Chemicals renewed certifications for the following: ISO 14001 Environmental Management, which is implemented as an Integrated Management System, OHSAS 18001 Occupational Health and Safety Management Systems; ISO 9001:2015 Quality Management System; ISO 27001 Information Security Management System; ISO 50001 Energy Management System; ISO 22000 Food Safety and ISO FSCC 22000 Global Food Safety Management System certificates for sodium bicarbonate product; HELAL, KOSHER, FDA, and GMP+ certificates for the feed type sodium bicarbonate product. In addition to the current management systems, COVID-19 Safe Production Certificate was obtained.

At Şişecam Chemicals, R&D activities aim to improve existing processes in the production of soda and chromium compounds in an environmentally compatible manner with the use of low-cost technologies. Other R&D objectives include enriching the product portfolio with high value-added products and boosting Şişecam Chemicals’ competitiveness by reducing costs and improving productivity.

In 2020, Şişecam Chemicals conducted product development, carbon dioxide capture and cost minimization projects in the soda product group. New product development efforts as well as process and product quality improvement initiatives were carried out in the chromium product group. Requests related to the environment, product and raw materials were analyzed within a scientific framework.

Legally required permission processes were undertaken related to storage of soda and chromium process waste during the year.

SIGNIFICANT EVENTS

Committed to embracing sustainability and delivering consistent quality, Şişecam Chemicals participated in the World Soda Ash Conference on October 19-22, 2020. Şişecam attended the multi-day event as a global player in the soda sector and a close follower of market dynamics. At the event, Şişecam Chemicals had the opportunity to review the impacts of recent developments in the soda industry on its medium- and long-term sales and marketing strategies.

Şişecam Chemicals also actively participated in the Executive Board meetings and activities of the Turkish Chemical Manufacturers Association – Chemical Management Platform.

The All China Leather Exhibition (ACLE) and APLF Hong Kong trade fairs, which Şişecam has regularly participated in previous years, were not held in 2020 due to the pandemic.

MINING COMPANIES

Şişecam carries out its mining operations with Camiş Madencilik A.Ş. and Madencilik San. ve Tic. A.Ş. in Turkey, with Camis Egypt Mining Ltd. Co. in Egypt and with R.K. Vijenac d.o.o. in Bosnia & Herzegovina. The mining companies meet the silica sand, feldspar, limestone, dolomite and kaolin needs of Şişecam factories and supply raw materials to external companies engaged in the glass, ceramic, cement and silicate industries. Having more than 550 employees, the mining companies recorded a total production and sales of 3.9 million tons of raw material in 2020, of which 1.5 million tons were sold to companies outside Şişecam.

In addition to supplying raw materials to Şişecam’s glass factories, Camiş Madencilik A.Ş. is also an active industrial raw material supplier in foreign markets and has a significant share in the feldspar exports from Turkey. Thanks to its customer network of ceramic and glass producers across Europe and the Middle East, the Company contributes to the foreign currency sales revenue of Şişecam. Camiş Madencilik A.Ş. exported 438 thousand tons of industrial raw material to 13 countries in 2020.

The modernization and capacity increase investment effort that commenced at Yalıköy Facility the prior year continued to move forward in 2020. Şişecam’s first-ever mining production site, the Yalıköy facility meets the sand needs of Şişecam factories that produce glass packaging and glassware. An EIA (Environmental Impact Assessment) permit was obtained for Çine Harımcık feldspar license; as a result, the amount of mineable reserve in the license was increased. In addition, the license handover process for Milas Türbe feldspar was completed during the year. As part of new mining exploration efforts, Şişecam participated in tenders held by the General Directorate of Mining and Petroleum Affairs and obtained two low-iron limestone licenses in the Eskişehir-Okçu region.

ŞİŞECAM ELYAF

In early 2019, Şişecam Elyaf commissioned its glass fiber plant equipped with state-of-the-art technologies. The facility was assessed by the Ministry of Economy, General Directorate of Incentive Implementation and Foreign Investment as a Strategic Investment.

Şişecam Elyaf manufactures the main inputs for the composite industry, including mats, multi-end roving, single end roving, and chopped strands. A wide range of business sectors are supplied for use in wind turbine blades, interior/exterior automotive parts, engineering plastics, marine products, industrial applications and construction.

In response to the Covid-19 outbreak, which affected the entire world in 2020, Şişecam Elyaf took necessary steps to meet the needs of its target sectors and ensure continuity of its production operations.

Currently, market players are exploring opportunities in mergers and acquisitions. While the EU continues to protect its local producers, a temporary tax has been imposed on products manufactured in Egypt. In 2020, an official application was filed to the relevant authorities seeking actions against import products from Egypt in order to protect local producers in Turkey.

Şişecam Elyaf maintained its collaborations with customers and completed its preparations for 2021. Developments in the wind energy sector in Turkey and target European markets were monitored during the year, and business relationships have been established with industry leading companies.

The new glass fiber plant equipped with advanced technologies reached a competitive performance level in a short period of time. As a result, Şişecam Elyaf quickly stepped up its activity in the market. In 2020, Şişecam Elyaf moved forward with its efforts to boost productivity of its plant and entered new markets despite the impact of the pandemic.

During 2020, concurrent to its highly effective marketing activities, Şişecam Elyaf also accelerated its international certification efforts with the end of being recognized and included in customer supplier portfolios despite the global economic slowdown caused by the pandemic in 2020. Aiming to satisfy the needs of target industries in Turkey and abroad, Şişecam fiber products hold DNV-GL, Lloyds Register, FDA (USA), FC (EU 10/2011), KTW and ACS certifications, all of which are internationally recognized.

Şişecam Elyaf conducts R&D activities in line with its strategic targets and objectives. R&D efforts are focused on improving existing processes, boosting efficiency and developing high-performance products. To this end, various R&D activities are underway to expand the portfolio with new products by reviewing glass composition, process conditions and final product performance.

In 2020, Şişecam Elyaf maintained its membership at the Turkish Composite Industrialists Association while also becoming a member of the Association of Energy Industrialists and Businessmen and the Turkish Wind Energy Association.

OXYVIT

Oxyvit Kimya – founded jointly with the Italian Cheminvest B.V. in 1996 and wholly acquired in 2017 – produces Vitamin K3 and sodium metabisulfite. As Europe’s only Vitamin K3 producer, Oxyvit Kimya is positioned as a major supplier in the world feed industry with this high value added product. Sodium metabisulfite is used in the food, mining, textile and water treatment sectors. Oxyvit’s products are preferred by customers due to their high quality.

Despite the global slowdown in the sector, Oxyvit Kimya maintained its strong position in the market in 2020. Total sales volume in tons went up by 7% compared to the previous year, and export sales accounted for 71% of Oxyvit’s total revenues.

Oxyvit Kimya exports about 87% of its Vitamin K3 production, primarily to Europe. Thanks to its high quality products and supportive relationships with business partners, sales of sodium metabisulfite, another product produced by the plant, rose by 8% in 2020 despite the intense competitive environment. Oxyvit exported about 56% of its sodium metabisulfite production during the year.

EXPECTATIONS AND OBJECTIVES FOR 2021

Soda sector forecasts indicate that capacity increases and regional supply-demand variability will continue in 2021. Strong competition is expected in the global market. After declining this year due to the Covid-19 pandemic, soda demand is projected to gradually recover in 2021. Demand for soda is expected to return to 2019 levels in the medium term with higher sales prices, tonnage and demand.

In response to the highly competitive environment expected in the soda sector in 2021, Şişecam Chemicals plans to prioritize projects that manage costs, optimize procurement processes and boost energy efficiency. In the coming year, Şişecam Chemicals aims to improve its operational efficiency and effectiveness with a focus on operational excellence and synergy creation by consolidating its services offered to global customers. Additionally, Şişecam Chemicals plans to sharpen its competitive edge by transforming its operating model via end-to-end digitalization of the entire value chain.

Depending on the course of the pandemic, chromium chemicals sales volumes are expected to rise as a result of projected recovery in sectors in which chromium chemicals are used as an input. Şişecam Chemicals aims to maintain its effectiveness in strategic markets and further boost its market share to reinforce its leadership position.

Strategic priorities include expanding its sales volume and revenues by bolstering its competitiveness with capacity utilization maximization, operational efficiency and cost improvements.

Camiş Madencilik plans to acquire new mining sites in Turkey and abroad in order to meet raw material needs from Şişecam plants and expand its mineable reserves by conducting drilling operations in existing licenses. In 2021, Camiş Madencilik’s priorities include maintaining and boosting sales to companies outside Şişecam via value-added products.

In line with the goal of commissioning the Yalıköy Restructuring project in 2021, Camiş Madencilik is moving forward with its capital investment activities. The restructuring project is critical to the facility’s modernization. In addition, the project will reduce imported sand needs thanks to the planned capacity increase.

Camiş Madencilik’s plans for the next investment period include installing a flotation unit to produce mid-iron quality silica sand for the use of flat glass plants and moving the solar sand preparation unit in Egypt to Bilecik to expand the capacity of the existing magnetic separation unit. Camiş Madencilik plans to produce solar sand at this plant to meet the glass factories’ demand for low-iron sand.

In 2021 and beyond, Şişecam Elyaf is committed to achieving growth in foreign markets and boosting its competitiveness in the wind energy industry in both domestic and foreign markets. Şişecam Elyaf plans to enter new markets, monitor developments related to protection measures of local producers and track other relevant sector developments.

Oxyvit Kimya aims to increase its market penetration by diversifying its customer portfolio in global markets, mainly Europe and South America, with Vitamin K3 and sodium metabisulfite products.