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August 15, 2018 02:00 AM

Machinery sales to Turkey slumping

Plastics News Europe
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    Official White House Photo by Shealah Craighead)
    President Donald J. Trump and President Recep Tayyip Erdogan of Turkey at the United Nations General Assembly meeting in 2017.

    Turkey's economic woes are beginning to show up in some plastics data.

    German rubber and plastics machinery deliveries to Turkey fell by 4.5 percent in the first five months of the year, compared to the same period last year.

    The German machinery trade association VDMA said overall machinery sales from Germany, including plastics and rubber, were down 4.7 percent. The year-on-year decline made Turkey's economic difficulties "more and more obvious."

    And VDMA expects the negative trend to continue in the coming months as the Turkish lira has fallen significantly against the euro and dollar, mainly as a result of the Trump Administration's sanctions and punitive tariffs levied on the country.

    Conditions are not likely to improve quickly, with the U.S. doubling tariffs on Turkish steel and aluminum earlier in August, while on Aug. 15, Turkey said it would raise duties on U.S.-made goods including PVC, coal, alcoholic drinks, tobacco and passenger cars.

    The U.S. does about $12.5 billion in goods and services exports to Turkey each year and imports about $9.9 billion worth of goods and services, according to the U.S. Trade Representative's office.

    On Aug 15, the Turkish lira was worth about 17 cents. A year earlier, it was worth 28 cents. The value compared to the euro was similar, dropping about 25 percent in a year.

    "This makes imports considerably more expensive for Turkish customers. However, the weak lira exchange rate is also a great burden for all those companies that have taken out loans in foreign currency," said VDMA chief economist Ralph Wiechers.

    According to VDMA, the general conditions remain difficult for the Turkish manufacturing industry, despite a slight recovery after the July elections.

    However, the purchasing managers' index remained below the threshold of 50 points at 49 index points in July, having recovered from 46.8 points in June.

    The low index signals a possible contraction in economic performance, VDMA added.

    While production and new orders in manufacturing declined, export orders increased for the first time in three months, with the weaker lira improving the price competitiveness of Turkish exports. However, this advantage is partly eroded by the fact that numerous preliminary products have to be purchased increasingly expensively from abroad.

    With a market volume of early $33 billion, Turkey is the 12th largest machinery market worldwide.

    Just over a third of the machines sold in the market are manufactured domestically. Germany is the most important foreign machine supplier in Turkey with a market share of 13 percent, followed by China at 10 percent, Italy at 9 percent, the United Kingdom and Japan with each having a 4 percent share.

    Turkey is the 14th largest export destination for German machinery, with 3.7 billion euros ($4.7 billion) of exports to the country in 2017.

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