Commercial activity in Turkey grinding to halt amid uncontrolled lira depreciation

Commercial activity in Turkey grinding to halt amid uncontrolled lira depreciation
Both the consumer and industry in Turkey are feeling the pain of the lira's shocking descent in fuel prices.
By Akin Nazli in Belgrade November 23, 2021

Turkish fertilizer and pesticide producers have been forced by the unprecedented depreciation of the Turkish lira and related raw material shortages to temporarily halt sales, company officials told BloombergHT on November 23.

Due to the plummeting value of the lira, Turkish companies that import the majority of their inputs are unable to gauge and provide distributors with sales prices. They have found the solution in suspending sales.

“Our sales have been halted,” read notices sent by Turkish fertilizer and pesticide producers to distributors.

“Sharp currency depreciation is pushing our raw material costs up. We are not able to set prices anymore. We face difficulties in replacing our goods that are sold. We have difficulties in accessing raw materials. Thus, we have been forced to temporarily stop our sales,” anonymous company officials were quoted as saying.

A similar situation has developed in diesel wholesales, according to BloombergHT.

“Wholesale has been stopped,” some of those who call distributors to buy diesel fuel in tonnes are being told.

Reluctant to sell

Corn and barley traders in Turkey are also said to be reluctant to sell their products since they cannot determine how prices will develop. Sales on credit are out of the question by now, while those who sell their products, sell for cash.

Trade activity in Turkey is typically conducted with sales on credit, usually based on personal agreements or cheques. If sales on credit come to a halt, it means the majority of trade activity in Turkey will go on hold.

Also on November 23, Murat Akyuz, a board member at Turkish chemical exporters association IKMIB, told BloombergHT that manufacturers are facing difficulties in sourcing raw materials due to supply chain disruptions and that they therefore cannot produce their goods on time.

Some 80% of raw materials in Turkish chemicals are imported, according to Akyuz.

USD-based prices on such materials are up 100% and the impact is doubled when it comes to Turkey, he also said.

“Particularly with petrochemical products, there are serious problems at many plants. Fibre glass is an example when it comes to missing materials,” Akyuz added.