Turkish Firms Face Wave of Closures Amid Economic Reckoning 

Leftover textile materials are seen outside a shut-down textile factory at the organized industrial zone in Corum, Türkiye, August 23, 2024. (Reuters)
Leftover textile materials are seen outside a shut-down textile factory at the organized industrial zone in Corum, Türkiye, August 23, 2024. (Reuters)
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Turkish Firms Face Wave of Closures Amid Economic Reckoning 

Leftover textile materials are seen outside a shut-down textile factory at the organized industrial zone in Corum, Türkiye, August 23, 2024. (Reuters)
Leftover textile materials are seen outside a shut-down textile factory at the organized industrial zone in Corum, Türkiye, August 23, 2024. (Reuters)

It is hard for Dogan Duman to see how he can keep his garment factory in central Türkiye running much longer, even after firing a third of his staff to cut costs that have soared for companies nationwide, generating a wave of bankruptcies and closures.

Idle sewing machines are pushed to the side of his factory floor in Corum, where outside "For Sale" signs and padlocked gates dot the small city's once-buzzing industrial zone.

Such sober scenes are spreading across Türkiye as part of the fallout from a more than year-long policy-tightening effort, including a 50% benchmark interest rate, to rein in years of soaring inflation and overheated demand.

Thousands of companies like Duman's - which makes coats and jackets for global fashion brand Zara - are squeezed by inflation that topped 75% earlier this year, an overvalued lira, hikes to electricity and gas prices and dwindling export orders.

"The orders are shrinking daily because we are losing our competitiveness... and I think they will shrink even more," he said of his 27-year-old company that is now down to 60% capacity and 210 employees.

Türkiye is one of the world's top five garment manufacturers and a critical source for Europe's top brands. But despite its advantage of proximity to Europe, its main trade partner, Duman says swelling energy, labor and FX costs have left him trailing rivals in Vietnam and Bangladesh.

"Considering the current lira exchange rate and the expected further rise to minimum wage next year, I think we won't be able to compete," he said. "We will be at a point of shutdown."

These days, Turkish households and business are facing the economic consequences of a cumulative 41.5 percentage points of rate hikes that began in June last year and are now finally beginning to cool inflation, which dipped to 52% last month.

Last year's dramatic policy U-turn, including fiscal steps, aims to leave behind years of soaring prices and currency crashes under President Recep Tayyip Erdogan's formerly unorthodox approach of monetary easing to stoke growth.

But with credit now out of reach for many, and lira depreciation badly lagging monthly price rises, companies, especially apparel and textile exporters, are in a crunch.

Almost 15,000 companies closed down in the first seven months of the year, up 28% from 2023, according to the Union of Chambers and Commodity Exchanges of Türkiye.

Other data suggest bankruptcy stress is brewing.

Monitoring outlet konkordatotakip.com says 982 companies were granted initial court protection from debt in the first eight months of the year, almost double last year's total.

Construction and textile firms have made the largest number of such applications to suspend debt payments to banks and suppliers to continue operations, and also for bankruptcy proceedings.

Such company strains have knock-on effects, slowing or halting payments across the economy and lifting joblessness.

There may be "heavy costs," said Erdal Bahcivan, chairman of Istanbul Chamber of Industry. "While trying to save a company, dozens of (creditor) firms may end up in dire straits."

Some economists say that given the aggressive tools used to slay inflation, rising unemployment and bankruptcies are all but certain.

"This is a serious dilemma for the government," said Seyfettin Gursel, director at Bahcesehir University Center for Economic and Social Research. "It is trying to put the monster it created back into its lair, but doesn't know how to do it".

STREWN GARMENTS

In Corum, 500 kilometers east of Istanbul, some factories have broken windows and one had dozens of colorful rain-drenched garments strewn across its grassy yard.

Bulent Demirci, co-owner of a yarn factory in the city with 50 workers, said he shut it down a couple of months ago due to an "unpredictable economic outlook".

"We had production cuts from time to time in the past. But this time it is all doom and gloom," he said.

Ankara's latest hike to the minimum wage was to 17,002 liras ($500) in January, which is up 100% from a year earlier and 500% from the end of 2021, when a historic lira crash rocked Türkiye.

Gas and electricity prices have risen about sevenfold and threefold respectively since 2021 for small to mid-scale manufacturers.

Türkiye’s overall production costs are now almost 40% higher than in competing Asian countries in dollar terms, according to interviews with exporters, who also blame barriers to financing and dwindling working capital.

Exporters have lobbied for more currency depreciation given that, year-to-date, inflation is 32% while the lira has fallen only 13% to the dollar. Authorities however have urged lira holdings, helped along by high deposit rates.

Istanbul-traded Mega Polietilen and garment manufacturer 3F Tekstil are among those that applied for court protection from debt payments.

An executive at 3F who requested anonymity said the move helped as it struggled to survive with a total 600 workers, and to continue supplying fashion brands such as Mango and H&M.

"But our suppliers and those who have receivables will suffer more in this process," amounting to roughly 10,000 workers at outsourced manufacturers across the country, the executive said.

"When interest rates reached 60-70% the companies could not bear it. They cannot manage their debt," he said. "Businesses have paid for high inflation in Türkiye."



Oil Rises as Investors Return From Holidays, Eye China Recovery

FILE - Pump jacks extract oil from beneath the ground in North Dakota, May 19, 2021. (AP Photo/Matthew Brown, File)
FILE - Pump jacks extract oil from beneath the ground in North Dakota, May 19, 2021. (AP Photo/Matthew Brown, File)
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Oil Rises as Investors Return From Holidays, Eye China Recovery

FILE - Pump jacks extract oil from beneath the ground in North Dakota, May 19, 2021. (AP Photo/Matthew Brown, File)
FILE - Pump jacks extract oil from beneath the ground in North Dakota, May 19, 2021. (AP Photo/Matthew Brown, File)

Oil prices nudged higher on Thursday, the first day of trade for 2025, as investors returning from holidays cautiously eyed a recovery in China's economy and fuel demand following a pledge by President Xi Jinping to promote growth.
Brent crude futures rose 17 cents, or 0.06%, to $74.82 a barrel by 0547 GMT after settling up 65 cents on Tuesday, the last trading day for 2024. US West Texas Intermediate crude futures gained 19 cents, or 0.26%, to $71.91 a barrel after closing 73 cents higher in the previous session, Reuters reported.
China's Xi said on Tuesday in his New Year's address that the country would implement more proactive policies to promote growth in 2025.
China's factory activity grew in December, according to the private-sector Caixin/S&P Global survey on Thursday, but at a slower than expected pace amid concerns over the trade outlook and risks from tariffs proposed by US President-elect Donald Trump.
The data echoed an official survey released on Tuesday that showed China's manufacturing activity barely grew in December, though services and construction recovered. The data suggested policy stimulus is trickling into some sectors as China braces for new trade risks.
Traders are returning to their desks and probably weighing higher geopolitical risks and also the impact of Trump running the US economy red hot versus the impact of tariffs, IG market analyst Tony Sycamore said.
"Tomorrow's US ISM manufacturing release will be key to crude oil's next move," Sycamore added.
Sycamore said WTI's weekly chart is winding itself into a tighter range, which suggests a big move is coming.
"Rather than trying to predict in which way the break will occur, we would be inclined to wait for the break and then go with it," he added.
Investors are also awaiting weekly US oil stocks data from the Energy Information Administration that has been delayed until Thursday due to the New Year holiday.
US crude oil and distillate stockpiles are expected to have fallen last week while gasoline inventories likely rose, an extended Reuters poll showed on Tuesday.
US oil demand surged to the highest levels since the pandemic in October at 21.01 million barrels per day (bpd), up about 700,000 bpd from September, EIA data showed on Tuesday.
Crude output from the world's top producer rose to a record 13.46 million bpd in October, up 260,000 bpd from September, the report showed.
In 2025, oil prices are likely to be constrained near $70 a barrel, down for a third year after a 3% decline in 2024, as weak Chinese demand and rising global supplies offset efforts by OPEC+ to shore up the market, a Reuters monthly poll showed.
In Europe, Russia halted gas exports via Soviet-era pipelines running through Ukraine on New Year's Day. The widely expected stoppage will not impact prices for consumers in the European Union as some buyers have arranged alternative supply, while Hungary will keep receiving Russian gas via the TurkStream pipeline under the Black Sea.