Turkish shipyards’ competitive advantage is coming to an end

Domestic shipyards, which have become world brands by breaking new ground in special purpose shipbuilding, are in danger of losing global leadership in this field. When increasing costs and difficulties in accessing financing were added to the long-standing letter of guarantee problem, the leading shipyards of the sector began to lose the tenders they entered in Europe to rival countries. The shipyards, which are at par with the shipyards of Norway, to which they export the most ships, in terms of construction costs, are forced to pay prices higher than those of countries such as Poland and Lithuania. Speaking to ECONOMY, sector officials warn that special financial support for exporters and bringing the exchange rate to a competitive level has become urgent, otherwise much greater losses to the sector are inevitable.

Başaran Bayrak, Member of the Board of Directors of the Turkish Exporters Assembly (TİM) and Chairman of the Maritime Sector Board, reminded that the demand for special purpose ships has increased globally, especially for environmentally friendly projects, and said, “There is demand, but due to the increasing costs, we cannot enter into a contract and we are losing business to rival countries in Europe.” . “Only companies that do their own pre-financing can get work,” he said.

Customers say ‘Norway offers the same price’

According to the information we have obtained from industry sources, many shipyards that are world brands in their field are experiencing similar losses in tenders. While a local shipyard lost a tender for 10 ships to its European rival at the last minute last week, another shipyard failed to win the tender for a 120-meter live fish transport ship because it could not offer a competitive price. According to industry officials who shared details about the tenders, European customers who ordered ships are complaining that Turkish shipyards have started to offer almost the same price as Norwegian shipyards. However, Norway is the country to which Turkey exports the most ships. In another tender, he stated that the foreign customer gave the project to another European company, stating that even Poland and Lithuania build ships cheaper than Turkey. The biggest competitors of Turkish shipyards are the shipyards in Spain, Romania and the Baltic countries.

Ship, Yacht and Services Exporters’ Association (GYHİB) President Cem Seven stated that although the exchange rate did not increase at the rate of inflation, they have now lost their price advantage over European competitors due to the increases in labor, energy and domestic equipment costs, and said, “While costs have increased by nearly 80 percent We still go and exchange our foreign currencies in Euros, which have appreciated by 35 percent compared to the beginning of the year. This time, our companies are losing tenders because the costs are increasing. 1-year rediscount interest is around 30 percent. Since interest on rediscount loans is received when the loan is allocated, the interest rate increases to approximately 45 percent by the end of the year. High interest rates in both TL and foreign currency put a lot of pressure on ship and yacht exporters who have letter of guarantee problems. On the other hand, within the framework of the BRSA decisions dated July 7, 2022, TL loans are not provided to exporters who hold foreign currency more than a certain percentage of their balance sheet size. “In short, it has become very difficult to access the necessary financing,” he said.

They reached the giant league on private ships in 14 years.

Turkish shipyards were hit hard by the global crisis in 2008 and lost their competitiveness in commercial shipbuilding. With the crisis, almost all local shipyards turned to special purpose boat construction, which was a niche field starting from those years. The shipyards, which have achieved significant success in this field in a short time, have taken their place among the world giants with the construction of megayachts as well as special purpose ship projects such as fishing ships, passenger ships, platform support ships, tugboats and ferries. The sector, which has increased its global power in this field with its investments in R&D, is taking steps towards different fuel types such as completely electric, methanol and hydrogen, propelled by green energy. As of 2022, the shipyards ranked first in the world in exports of fishing vessels, second in the world in tugboats, sixth in the exports of ferries and pleasure boats, and among the top ten countries in megayacht exports.

First contraction in exports in months

Fears came true in the shipbuilding industry, and the first contraction in exports after months was experienced in September. According to TİM’s export data, ship and yacht exports from shipyards in September decreased by 10 percent compared to the same period last year and remained at 179 thousand dollars. Thus, in the January-September 2023 period, ship and yacht exports from Turkey increased by 36.3 percent on an annual basis, reaching approximately 1.4 billion dollars. In shipbuilding, which gained momentum in the summer months, exports increased by 294 percent in August. Thus, the 8-month exports of the shipyards increased by 47.8 percent compared to the January-August period of last year and exceeded 1 billion 182 million dollars. Speaking to ECONOMY last month, GHYİB President Cem Seven pointed out that the increases were due to the delivery of orders received two years ago and warned, “If the problems experienced by our sector, especially the lack of access to finance, are not solved, great losses in exports are inevitable.”

They were also the first address for environmentally friendly ships.

The shipbuilding sector ranks first in Turkey’s value-added product exports, with an average value of 20 dollars per kg. Shipbuilders, which have achieved many firsts such as the first electric tugboat, the first remote-controlled ship, the first methanol-fueled tugboat, and managed to become a world brand with the orders they received from developed countries such as Norway, Finland and the Netherlands, have become the global leader in orders for environmentally friendly, special-purpose boats with engines. Considering global ship orders, shipyards in Turkey are in a very strong position, especially in electric/hybrid/alternative fuel ships. According to the report in the Ship, Yacht and Services Sector Sustainability Action Plan announced in recent weeks, Turkish shipyards are in the first place in orders for ferries, tugboats and fishing vessels with these alternative fuels. (Ekonomim.com)

There are 5 main reasons that erode the competitiveness of shipyards

1 Turkish banks’ letters of guarantee are not accepted by European banks
2 High increases in energy, labor and domestic equipment costs
3 Suppression of the exchange rate
4 Difficulties in accessing finance
5 BRSA’s foreign currency/TL loan decision