Is a “Sudden Stop” Looming in Turkish Industry?
sudden stop
By Erol Taşdelen, banking consultant, columnist ParaAnaliz
Summary:
A sharp rise in coal prices is triggering fresh cost pressures across Türkiye’s industrial sector, raising concerns that production could slow significantly in the months ahead. Economist Erol Taşdelen warns that mounting financial strain, weakening demand, and policy constraints may push industry toward a “sudden stop” scenario.
Coal Prices Surge, Costs Spike
A steep increase in coal prices—one of the core inputs for industry—has added a new layer of fragility to production.
According to Erol Taşdelen, prices for Soma coal have surged from around 4,500 TL at the start of 2026 to approximately 6,500 TL in a short period, marking an increase of over 40%. In some cases, coal prices have climbed as high as 9,000 TL.
This is not merely a commodity price fluctuation, but a clear signal of a deepening cost crisis across the industrial base.
ANALYSIS: February Rebound in Industrial Output Unlikely to Last
Double Pressure: Financing and Input Costs
Industrial firms are now facing a dual squeeze:
- High financing costs driven by elevated interest rates
- Rising energy and raw material prices
Coal remains a critical input for energy-intensive sectors such as iron and steel, ceramics, and cement. As a result, price increases in coal are cascading through the production chain, pushing overall costs higher.
However, Taşdelen argues that the core issue is not rising costs alone—but the inability to pass these costs on to final prices.
Currency Policy Undermines Domestic Producers
Within the current economic policy framework, pressure on the exchange rate has created additional distortions:
- Imported goods have become relatively cheaper
- Domestic producers are losing competitiveness
This dynamic is producing a clear outcome:
- Rising import penetration in the domestic market
- Shrinking profit margins for local producers
- Declining production incentives
While this policy mix may appear to help contain inflation in the short term, Taşdelen notes that it risks weakening industrial capacity over the medium term.
PMI Signals Contraction
Leading indicators are already flashing warning signs.
The Purchasing Managers’ Index (PMI), a key gauge of manufacturing activity, has remained below the critical 50 threshold—indicating contraction in the sector.
This suggests:
- Declining new orders
- Slowing production
- Increasing pressure on employment
“Sudden Stop” Risk Emerging
Taşdelen highlights the growing risk of a “sudden stop” in industry—a scenario in which production gradually grinds to a halt rather than collapsing abruptly.
The process typically unfolds as follows:
- Orders decline
- Capacity utilization falls
- Cash flow deteriorates
- Investments are postponed
- Output is reduced
- Layoffs begin
Recent developments suggest that the early stages of this chain reaction may already be underway.
The Cost of Policy Choices
Over the past 2.5 years, economic policy has largely focused on:
- Suppressing demand
- Reducing inflation
However, Taşdelen argues that an alternative approach was possible:
- Supporting production
- Reducing input costs
- Containing inflation through increased supply
Had production been sufficiently supported:
- Producer price inflation (PPI) could have been better contained
- Pressure on consumer prices (CPI) might have eased
- Industry could have remained more resilient
Industry Sends a Warning Signal
The spike in Soma coal prices is not an isolated development—it is a systemic warning.
According to Taşdelen, the message from industry is clear:
“Costs are rising, sales are weakening, and competitiveness is eroding.”
If timely policy intervention does not follow, Türkiye’s economy may face a production-driven slowdown.
In that case, the risk of a “sudden stop” could shift from a theoretical concern to a tangible economic reality.
