The news of Merve Yiğitcan from Ekonomim Newspaper points to the loss of momentum in the Turkish economy.
Recession outside, high energy costs inside; In sectors such as steel, copper, aluminum, foundry, textile and cement, it has reduced the capacities below 70 percent. In the glass sector, which could not stop production, the recession inflated the stocks. Worried about further decrease in capacities, the business world wants businesses to be supported with sectoral price tariffs and surveillance measures.
The slowdown in exports due to the recession and the increase in energy costs, as well as the lack of equity, brought the capacity utilization rates to dangerous levels in certain sectors. While the capacity utilization rates in energy-intensive sectors such as textile, steel, copper, aluminum, casting and cement, which have an important share in exports, fell below 70 percent, the decrease in domestic and foreign demand in particular inflated the stocks in glass, which is one of the continuous process sectors. The slowdown in the industrial wheels is also seen in the electricity consumption data. Because monthly electricity consumption amounts have been on the decline since July 2022 when compared to the previous year. Speaking to EKONOMİ newspaper, sector representatives demand that energy costs be reduced immediately in critical sectors and point out that measures should be taken on a sectoral basis in order to protect the competitiveness of exporters.
Electricity consumption has been falling for 5 months
The Manufacturing Industry Capacity Utilization Rate, announced by the Central Bank, was 76.5 percent in December. The rate, which rose to the highest level of the year with 78 percent in May, decreased to 75.9 percent until November, and experienced a limited increase in December. This ratio across the manufacturing industry is below 70 percent in some sub-sectors. Capacity utilization rates, curbed by the increase in energy costs and the decrease in domestic and foreign demand, started to bring employment losses, especially in the textile sector. In addition, it is worrying that businesses that cannot produce because they cannot find financing are starting to miss their export orders. Decreasing capacity usage in factories is also seen in electricity consumption data. Electricity consumption in November decreased by 6.4 percent compared to the same month of the previous year. The decrease rate in October was 3.6 percent; The rate of decrease in September was 0.8 percent.
Shortage of financing also hit production
Çetin Tecdelioğlu, President of Istanbul Ferrous and Non-Ferrous Metals Exporters’ Association (IDDMIB), said that the capacities in the sector, especially in copper, aluminum, casting and stainless sub-branches, are now below 65 percent. Tecdelioğlu stated that the energy costs in the relevant sectors have risen a lot, and that a sectoral tariff should be introduced in the energy pricing of the metal industry, just like in the European Union. In addition, Tecdelioğlu stated that the freight prices, which decreased to 2 thousand dollars, started to reflect negatively on the sector and said, “Our logistics difference is disappearing. Currently, our only attraction for export is our closeness to export logistics and our ability to respond quickly to demand with partial production. However, we can use these advantages with competitive energy prices.” Tecdelioğlu, who pointed out that the companies experiencing working capital shortage due to the lack of access to finance, started to miss their export orders because they could not produce, warned that the sector is at risk of missing more exports if the conditions for access to finance do not improve.
Capacity utilization rate in steel is 51 percent
General capacity utilization in the basic metal industry decreased to 75.1 percent in December. However, the sector representatives, who pointed out that the capacities in the steel industry have decreased to 50 percent, are worried. According to the Turkish Steel Producers Association (TÇÜD) data, Turkey’s crude steel production amounted to 2.4 million tons in November 2022. Due to the 30.7 percent decrease in production, the capacity utilization rate decreased to 51 percent in November. The 11-month capacity utilization rate, on the other hand, decreased from 74.8 percent to 63.3 percent compared to the same period of the previous year. The capacity utilization rate is expected to decrease to 62.9 percent in 2022.
TÇÜD Secretary General, Veysel Yayan, listed the reasons for the decrease in capacity utilization rates as falling export demand due to the shrinkage of steel demand in world markets and increase in energy costs. Emphasizing that it is not possible to improve the competitive conditions of the sector as long as natural gas and electricity prices are at these levels, Yayan reminded that the steel industry is taken into account in rival countries and said, “The Turkish steel industry has no support. For this reason, the sector cannot compete in export markets and cannot make capacity investments and modernization investments. We expect energy prices to be reviewed in line with this, taking into account the declining global energy prices in Turkey.”
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The textile industry cannot afford the costs
The capacities in the textile sector, which struggled with idle capacity and loss of employment, fell below 70 percent. Ahmet Öksüz, President of Istanbul Textile and Raw Materials Exporters’ Association (İTHİB), said that the capacity utilization rate in the sector is around 65 percent, and underlined that this rate has decreased to 60 percent in cotton spinning and knitting industry. Explaining that the increase in energy costs and the slowdown in demand in the textile industry, just like in the basic metal industry, affect the capacity utilization rates, Öksüz stated that the labor costs that will increase in 2023 will also put a lot of pressure on the industry. Saying, “We are at a disadvantage in terms of cost,” Öksüz said, “Our competitors in the world use electricity at 7 cents, and labor costs are at the level of 250 dollars. We use electricity at 24 cents, the labor cost came to the employer $650, even if the food and service is included, it is around $750. Turkey cannot afford the labor cost over $550,” he said. Öksüz reiterated that the exchange rates should increase in line with inflation and suggested that “A special exchange rate should be determined for the exporter, at least in order to meet the labor and energy expenses of the exporter”.
Cement production decreased by 8.5%
Cement is one of the sectors that suffer from capacity losses. The capacity utilization rate in the sector, which is faced with a decrease in demand from the domestic and foreign markets in parallel with the weakness in construction and infrastructure investments, is around 64 percent. 8.5 percent in production in the first 9 months compared to the previous year; In the sector, where there is a 12 percent decrease in domestic sales, the decrease in exports is around 8 percent on the basis of quantity. In the sector, where the annual installed capacity is 118 million tons, the production has decreased from 58.6 million tons to 53.6 million tons in the first 9 months. Evaluating the slowdown in the sector, Turkish Cement Industrialists’ Association (TÜRKÇİMENTO) CEO Volkan Bozay stated that the construction sector has shrunk for the last 5 quarters and there has been a contraction in foreign markets, and that the capacity utilization rates are in a downward trend in the last quarter of the year. Stating that a decrease is expected in the export markets in 2023, Bozay said, “There is an expectation that the capacity utilization rates will decrease a little more next year. Our most important export markets are Africa, Israel and the USA… The African market is almost at a standstill right now. If the investments in America are mobilized, this may affect us positively,” he said. Bozay added that there are problems with energy costs and managing costs in the sector.
Glaziers tried to stock
In the glass sector, which cannot close its furnaces due to the process, the capacities are running to stock. Stating that the capacity utilization rate in the glass sector, which was 87.5 percent last year, decreased to below 85 percent, the representatives of the sector draw attention to the fact that the stocks in the sector, which is a continuous process, have swelled a lot. Düzce Cam General Manager Serkan Turğut said, “We are an energy-intensive industry, so our biggest input is energy. Increases in energy costs are growing like an avalanche. This forces us to compete with imported products. Freight prices had increased a lot, and now that they are back, foreign manufacturers have started to send products to Turkey. In other words, the import share is increasing here,” he said. “We are a continuous process. We have to continue production,” said Turğut, “We reduced the capacities a little. It fell below 85 percent. But energy costs are pushing us seriously. While our natural gas bill was 10 million TL in 2020, it increased to 160 million TL this year. We have started to have too much stock. We are actually working on stocks because we can’t stop. For example, in 2022, when we entered with 10 thousand tons of stock, this amount increased to 70 thousand tons. After a while, when there is no place to put stock, you may have to close the process.”