Machine Exports Reach $25.8 Billion in 11 Months

According to the consolidated data from the machinery manufacturing industry, Turkey's total machinery exports, including free zones, reached $25.8 billion by the end of November, remaining at the same level as the previous year. The sector exported $2.3 billion worth of machinery in November, reflecting a 3.7% decrease on a monthly basis. Despite a decrease in the tonnage of machinery exports over the 11-month period, manufacturers managed to match last year's figures thanks to a 4% increase in average export prices per kilogram. In November, when export unit prices rose to $7.7, the most significant increases in the top twenty markets were seen in Morocco at 47.4%, in Italy at 23.3%, and in Egypt at 22.2%. In the top three major markets, Germany, Russia, and the USA, the average unit export prices per kilogram ranged from $10.3 to $12.9. According to TURKSTAT data, by the end of the first ten months, the highest increase among economic regions was 17.5% in NAFTA and 9.1% in MERCOSUR, while the largest loss was 22.8% in ASEAN. With a 2.6% decline in annualized machinery imports, the machinery trade deficit fell to $15.9 billion. The tractor and agricultural machinery sector, which saw a 21.4% decrease in imports over ten months, joined the ranks of sectors with export surpluses, while HVAC systems, with a 15% increase in imports, began to show a deficit.

"Europe is losing its grip on industrial trend tendencies." Commenting on the new global dynamics in trade amidst the ongoing Ukraine-Russia war, rising tensions in the Middle East, and potential threats like China-Taiwan, the President of the Machinery Exporters Association, Kutlu Karavelioğlu, stated: "In this period of uncertainty that undermines geopolitical stability, the USA, under a management approach that declares it will not adhere to any traditional institutions or rules, is preparing to confront everyone it sees as a competitor. The European Union, on the other hand, appears to be moving further away from budget discipline due to its energy policies and the bureaucratic tendency towards regulation and directives. Sectoral apex organizations frequently emphasize that the end of the era of rule-bound competition is near, yet the EU seems to be slow to prepare for this change. An additional factor exacerbating this situation for the EU is the green transformation process, which causes a lack of fossil energy and the rapidly diminishing natural gas reserves, potentially leading to a new energy crisis... Due to high production costs, many factories in Europe are increasingly likely to reduce their output. ORGALIM, representing a turnover of €2.8 trillion and 11.7 million jobs in the machinery sector, announced that losses in 2024 could reach 5.3% in turnover, 3.9% in investment, and 1% in employment. While indicating that the decline will continue, it attributed the sector's fundamental issue, which will have contracted for three consecutive years by 2025, to the ongoing erosion of the EU’s competitiveness."

Karavelioğlu noted that this turmoil has led to intense concerns about deindustrialization, stating, "The rising threat perception seems to have persuaded German federal governments to temporarily partner with large businesses. In Germany, which has a decisive share in our machinery exports, industrial production has decreased by 8.3% over the last two years. Political uncertainty in Germany and France, the loss of strength in these countries' industrial trend tendencies, and the decline in the Euro may persist for some time. While this process, which detracts from the export climate index in Europe, appears to be a serious issue for high-tech sectors like machinery, it may also facilitate the industrial expansion into peripheral countries."

“If Syria can return to normalcy, it will be the jewel of the sector." Addressing shifts beyond developed economies in the triangle of sovereignty struggles, protectionism, and loss of competitiveness, Karavelioğlu commented on the situation in Syria: "If Syria succeeds in achieving a stable democracy, it is not difficult to predict which services, comforts, or production tools will be prioritized in the subsequent reconstruction, settlement, and industrialization processes specific to the machinery sector. The UN has stated that $400 billion is needed for the reconstruction of Syria, and even the perception that it may be better than before could provide a tremendous leverage effect for producers of construction materials such as iron-steel and cement. The Turkish construction and machinery sector, which has significantly developed, especially after the post-earthquake period, will likely be among the first to enter the field in Syria. The machinery needs for the rebirth of many forms of vanished activities and light industries will be funded by numerous countries and institutions, including grants. However, we believe that social integration, historical ties, and close neighborly relations bring more responsibilities than opportunities for our sector. Although it is too early for speculation, considering that Syria currently conducts two-thirds of its foreign trade with Turkey, it is essential to strategize on methods to realize the natural superiority of Turkish machinery in neighboring geographies, similar to Iraq and Russia."

“Job and labor peace must be preserved with minimum wage." Karavelioğlu noted that domestic industrialists are focusing on minimum wage negotiations and the potential interest rate reduction cycle expected to begin in December, evaluating the impact of monetary policy on 2025 expectations as follows: "The shrinkage in machinery equipment investments, which entered the negative territory after 18 quarters, was 8.6% in the third quarter. We will close 2024 with a production decline of around 8%. While our exports will converge at around $28 billion, close to last year’s figures, we will have gained some ground against imports. Data suggesting that the increase in the consumption of goods and services is one of the main causes of inflation indicates that an asymmetric balance has formed against the producer sectors in the economy. While this process increases manufacturers' expectations for monetary easing, the prevailing view is that financing costs in the market will remain high for some time, further prolonging the stagnation in the domestic market."

In this critical period, which holds great importance for disinflation policies, Karavelioğlu pointed out that the minimum wage increase will be the most crucial determinant for many sectors, concluding his remarks as follows: "The announced rate is of great importance for the preservation of job and labor peace. According to OECD data, our sector, which has a domestic value-added rate on exports at the same level as its German competitors and has reached this high rate of 76% under information and technology-intensive competition with specialized personnel, should be one of the players that manages this process best. However, the minimum wage increase, perceived as a general indicator, significantly affects even sectors like ours, which maintain employment with much higher wages. In a period where regional and sectoral disparities are increasing and informality is prevalent globally, we must discuss the challenges of setting a single rate due to the hopes or expectations of a flat application."