Headline: Machine Exports Reach $20.7 Billion by End of Q3

According to the consolidated data from the Machine Manufacturers Association, Turkey's total machinery exports, including free zones, amounted to $20.7 billion in the first nine months of the year, marking a 1.5% decrease. Kutlu Karavelioğlu, President of the Machine Exporters' Association, noted that during a period where the global industrial PMI declined to 48.8 and export orders have been falling for four consecutive months, the prices of machinery exports are increasing contrary to the general trend, yet exports are decreasing. He emphasized that the way to progress without sustaining permanent damage in the machinery manufacturing, which contracted by 7.6% in the first eight months, is to curb the machinery imports, which reached $44.5 billion over the past 12 months, while maintaining the current level of exports.

In September, there was a 0.3% increase in monthly exports as the average export unit prices per kilogram rose by 5.5%, reaching $7.7. The largest export contributors in the nine-month period were household and industrial cooling machinery and internal combustion engines and parts, each exceeding $2 billion. Sectors with the most notable increase in exports included turbines, jets, and hydraulic cylinders with a 25% rise, and textile and apparel machinery with a 19% increase. Among the top countries importing machinery, Germany maintained its lead despite a 6% decline, followed by Russia with a 17% drop and the U.S. with an 11% rise. As of the end of August, 12-month machinery imports saw a marginal 0.2% decrease, reaching $44.5 billion.

Karavelioğlu highlighted that despite optimism at the year's start for a swift recovery in the global economy by the third quarter, such expectations did not materialize. He pointed out that efforts to curb inflation, which make financing costly, are pushing industrial production towards stagnation, while service sectors continue to grow. Although global interest rate cuts are fostering optimism, there is still no visible increase in demand. He believes that, despite a process where the global industrial PMI has fallen to 48.8 and export orders have declined continuously for four months, world trade in goods is expected to grow by around 2.5% by the end of 2024.

Karavelioğlu projected that Turkey's total exports would increase by the year's end, partly due to price reductions. "It is possible to attribute this success achieved during a period marked by concerns over high costs and low exchange rates to not utilizing credit, converting stocks into cash, paying off debts, fulfilling commitments, maintaining scale and personnel, and retaining customers or markets. However, it is essential to consider that some exports perceived to be below their actual value come with costs not only for companies but also for the national economy. We must recognize that this unsustainable scenario carries risks such as increased reliance on imports, attempts to compensate losses internally, and, consequently, inflationary pressure," he stated.

Karavelioğlu emphasized that the machinery sector, which has compelled to sustain exports without raising domestic prices, is the most affected manufacturing branch by inflation due to its high local value-added structure and employment of high-skilled personnel. "Machinery and equipment investments in Turkey, which achieved an 86% real increase over the last four years, contracted by 5.6% for the first time in 18 quarters. Additional investment will not be necessary until the capacity utilization rates in general manufacturing rise back to the 80-85% range. Contrary to the general trend in our exports, our export prices in machinery are rising, and our exports are declining. To progress without permanent damage in our manufacturing, which contracted by 7.6% in the first eight months, and without losing our scale and qualified personnel, the key is to curb machinery imports, which reached $44.5 billion in the past 12 months, while maintaining current export levels. Instead of considering this situation as a correction in our extraordinary 72% increase in machinery production over the last four years, we should develop ways to quickly turn our intense focus on productivity and twin transformation activities into competitiveness," he said.

Regarding the European Union (EU), Turkey's largest export market for machinery, Karavelioğlu stated, "The data from the EU is as critical as domestic indicators for the Turkish machinery industry. The EU, which is declared by the highest authorities to be rapidly losing its competitiveness against China and the U.S., has no choice but to take a step back in areas like decarbonization, circularity, and a sustainable economy. On the contrary, while protecting its eroded competitiveness with new certification and customs barriers, it's on the agenda to create special funds for external competitiveness. On the other hand, when the EU's second quarter 2024 figures are evaluated, it is observed that there is no contraction outside Germany. However, the contraction in this country, where gross investments have been declining for five consecutive quarters, deeply affects the equipment, machinery, and construction sectors. The German machinery sector will close this year with an 11% drop in orders, 8% in production, 12% in imports, and 7% in exports. This problematic performance in Germany, the locomotive of the EU economy, coupled with our losses in Russia and Israel, creates significant pressure on our exports."

He pointed out that there is noticeable growth in Poland, which serves as a hinterland for Germany, and that the demand Turkey can meet has recently shifted to this region. "The German government just announced yesterday that it will provide a direct 10% support for machinery investments. Our efforts to maintain our share in the German market, which holds great potential for all our subsectors, especially for food, packaging, and construction machinery, are increasing. We will host purchasers from major German companies in Istanbul on December 3-4. We invite all our exporters who wish to participate in this event, which will be proof of renewed interest in Turkey, to join bmematchmaking.com and meet with buyers."