A growing number of Turkish factories are considering shutting down production

A growing number of Turkish factories are considering shutting down production in the near future due to high electricity costs, Veysel Yayan, secretary general of the Turkish Steel Manufacturers Association (TCUD), told the Turkish newspaper Cumhuriyet.

Yayan says a 600 percent rise in energy costs is not sustainable and Turkish steel producers are unable to reflect this rise in their prices. "Factories started to think whether they should incur losses by operating or by shutting down production."

Highlighting the decline in crude steel production, Yayan notes: “The last quarter of the year is not looking good. Energy surges have a negative impact on our competitiveness.”

At the beginning of the year, factories expected a 10% increase in production compared to the previous year, but it is likely that the year will end with a drop of more than 10%, adds Yayan.

“Over the past three months, there has been a decrease in average monthly production by 18.3% and exports by 14.3%. This decline does not reflect the 50 percent increase in electricity and natural gas prices on August 30 and the negative impact of the new regulation introduced by [Turkish state gas distributor] Botas on September 29. This situation shows that the last quarter of the year will be more challenging for our steel industry,” warns Yayan.

Meanwhile, the capacity utilization rate of Turkish factories, which was 75% last year, has dropped to 60% in the past three months. Further decline is expected in the last quarter. In the first quarter, when global steel production fell by 5.5%, the decline in production in Turkey was limited to 2.5%.

“But today we are lagging behind them [the rest of the world]. The EU provides energy support to its producers. Our government also needs to support the manufacturer. 600% of energy hikes are not sustainable. It needs to be normalized, since we cannot reflect this growth in the prices of our producers,” Yayan laments.

“If manufacturers decide to take a loss by not working, it will be a big loss for the economy. Production should not be unstable. In trying to improve the situation of Botas, we must be careful not to complicate the situation of other institutions,” he concludes.