Reduced demand in Europe is weighing on clothing exports from Turkey

Reduced demand in Europe is weighing on clothing exports from Turkey

Turkish clothing exporters are facing tough times, with the falling euro taking a big bite out of Turkish ready-to-wear clothing export revenues, at a time when weak economic performance across Europe is dampening its key markets. But there could also be a silver lining, executives tell just-style.

Turkey sells its clothes to Europe in euros, but sources many inputs in US dollars, so the euro falling against the dollar, from EUR1.36 last year to EUR1.18 earlier this year, has hurt.

When valued in US dollars, Turkish exports tumbled by US$1.2bn for the first half of 2015 compared to 2014.

Ahmet Sisman, of the Istanbul Apparel Exporters’ Association, says that because about 80% of Turkish apparel sales are in Europe using the euro as currency, revenues calculated in dollars show a big loss.

"If you [use the euro to calculate values], our exports are not in very serious decline, but when we calculate in dollars, unfortunately in the first half of this year we had a very serious decline in apparel exports," Sisman told just-style.

But this is not just an accounting issue – it is a real problem for the Turkish industry given that Turkish manufacturers pay many of their costs for raw materials in dollars. Apparel manufacturers in Turkey sold US$9.4bn worth of clothing from January to June in 2014, and only US$8.2bn in the same period this year, according to the Istanbul Textile and Apparel Exporter Associations (ITKIB), an umbrella group that includes the garment export association.

Most of these losses were in Europe, such as Eurozone countries Germany, Spain, France, the Netherlands, Italy, Belgium and Lithuania. And these are not just because of the currency exchange rate - according to ITKIB data, Turkey export volumes also fell, by 13.3%.

Sales have, for instance, fallen in non-Euro European Union (EU) countries Britain, Romania, Poland and Denmark.

And exports to the important Russian market have been hit especially hard, dropping by 43.3% in the first half of 2015 because of the crisis in Ukraine and depreciation of the rouble amidst falling oil prices and international sanctions.

Seref Fayat, president of the Turkish Clothing Manufacturers' Association (TGSD), says that the fall in sales is from reduced demand in Europe due to economic problems.

A silver lining?

However, Fayat says that looking ahead, the fall in the euro might actually help, with buyers in EU countries maybe moving some of their business from east Asia, where manufacturers sell in dollars, to Turkey, where exporters mostly sell in euros.

"I foresee an increase in demand in Turkey by the end of this year and the next," Fayat says. "They’re not going to want to buy in dollars any more, but in euros. The price difference between the Far East and Turkey is a difference of 25%."

Rasin Akcakaya is head of Akcakaya Textiles, whose sales have increased this year. He told just-style he is receiving e-mails from buyers who usually do business in China, where manufacturers sell in dollars, but are looking to buy more in Turkey because of the euro’s low price.

"[Selling in euros] is one of the biggest advantages for us," Akcakaya explained. "[Buyers] say that they have products from China but they’re not happy with the prices, plus transportation costs."

Sisman said even now, the volume decline is not that steep: "In fact in volume we don’t have a very serious decline," he said.

Turkey’s top export items in the past year included T-shirts, sweaters, sweatshirts, socks, suits, blouses, men's shirts and trousers.