Turkish Shipbuilding: Currency Pressure Drains Competitive Edge

Turkey's ambitious position in the global shipbuilding market is under severe threat, facing a significant loss of competitiveness due to rising costs and exchange rate stability. Despite ranking among the world leaders in mega yacht and fishing vessel production, the sector is experiencing a considerable bottleneck in new order inflow.

Soaring Costs and the Heavy Toll of Currency Dynamics

Mustafa Talha Pepe, Chairman of the Ship, Yacht and Services Exporters' Association (GYHİB), warns that the gains achieved by Turkey's shipbuilding sector since the 2008 crisis are now at risk. Although the sector stands out for its high-quality production with an average export value of $25 per kilogram, current economic conditions overshadow past successes.

■Some shipyards have not signed new contracts for one year.

■Pepe states that they expect the exchange rate to increase only at the rate of inflation.

■The majority of ongoing projects date back one or two years and are set to conclude this year, contributing to a record export expectation of around $2.5 billion. However, over 90% of this figure stems from past contracts.

■The outlook for new orders in 2027 and 2028 is "not very encouraging" due to the stable exchange rate.

Dramatic Erosion of Competitive Strength

The international competitiveness of Turkish shipyards has significantly eroded in recent years, placing them at a disadvantage against rivals like Spain, particularly in the North European market.

■"It's suicide to approach our customers with old prices," Pepe remarks, summarizing the sector's predicament.

■While competing head-to-head with Spain three to four years ago, Turkey is now 20% more expensive with current costs. Six years ago, Turkey was 15% cheaper than Spain.

■Rising costs on ongoing projects are not being passed on to European clients, leading to losses for shipyards. While seen as an effort to maintain customer loyalty, this practice threatens financial sustainability.

The Importance of Niche Markets in the Global Arena

As South Korea, China, and Japan continue to dominate large-scale shipbuilding projects, and the U.S. market remains closed due to regulations, Turkish shipyards are compelled to focus on niche production and specific geographies.

■Canadian and North European markets remain attractive for European shipowners seeking specialized production and high quality.

■Although the quality and custom production capabilities of Turkish shipyards are appreciated by European customers, the lack of competitive pricing overshadows this advantage.

Sector Resilience and Promising Avenues

Despite the order bottleneck, no shipyards have closed yet; however, mergers and acquisitions are on the agenda. The sector is striving to navigate this challenging period through its own dynamics.

■The Ministry of Energy and Natural Resources' approach to offshore RES platforms presents a new window of opportunity for Turkish shipyards. Such large-scale infrastructure projects have the potential to utilize the sector's existing capacity and expertise.

This bottleneck experienced by the Turkish shipbuilding industry clearly demonstrates the direct impact of exchange rate policy on export-oriented sectors. In an inflationary environment, a relatively stable nominal exchange rate leads to real exchange rate appreciation, eroding the competitiveness of exports. This situation creates significant financial pressure, especially for sectors operating with long-term contracts and where a substantial portion of costs are in the local currency. The Central Bank's monetary policy stance must consider the balanced trajectory of the real exchange rate to ensure export sustainability. Otherwise, sectors with high value-added export potential risk losing their place in the global market.