Ukraine crisis: Purchase order cancellations reached 200 million dollars in Turkish clothing sector

After Russia’s declaration of war on Ukraine last week, the effects of the economic sanctions against Russia were first felt in Turkish ready-made clothing industry. Around 267 stores of 24 different brands operating in Ukraine were closed and a troubling waiting period began for 655 stores in Russia.

Stating hostile economic environment led to a recession in ready-made clothing sector and similar products, sector representatives stated cancellations and postponements will be around 150-200 million dollars for Ukraine. As for Russia, apparel shopping and exports have come to a standstill.

According to official figures of 2021, Turkey’s apparel exports to Ukraine exceeded 173 million dollars while in Russia it was around 287 million dollars. However, both countries export mostly carried through passengers, therefore the actual amount reaches 750 million dollars for Ukraine, and it exceeds a billion dollars for Russia.

Laleli and Osmanbey regions were affected the most

Laleli and Osmanbey regions are trade centers in Turkey which export both countries the most. Approximately 50% of the passenger-joined sales comes from Laleli alone. Şeref Fayat, President of TOBB Clothing and Apparel Sector Assembly, declared that the most obvious problem is in the Ukrainian market. Cancellations and postponements reached 150-200 million dollars in total. Fayat said, “Shipment to Ukraine has stopped and there is an uneasy wait in Russia. Since passengers are the ones who mostly contribute on trading, canceled SWIFT transactions were not a big deal so far. Furthermore, there will be no issues for our payment system as well.”

Only insurance policy for clothing sector is ‘trust’

Mustafa Gültepe, President of Istanbul Ready-to-Wear and Apparel Exporters’ Association, stated that more than 1.5 billion dollars of clothing goods were exported to two countries through passengers, and said, “We hope that peace will be achieved between Ukraine and Russia as soon as possible. However, at the moment, there are cancellations and postponements in Russia and exports to Ukraine has completely stopped. People want to see what near future holds.”

So, is there any insurance in the sector for cancellations and postponements? Gültepe explained the trades are mostly based on mutual trust among traders.

Gültepe underlined they will have problems with Swift transactions. Therefore, trades will be mostly depended on cash. Gürkan Tekin, President of the Mediterranean Clothing and Apparel Exporters’ Association, stated that the trucks are currently waiting in line at the border. “The first sector that is badly influenced due to recent events is clothing. Therefore, clothing industry is severely affected right now. There is no insurance policy for us; insurance policies generally cover the EU region. That is why there will be serious consequences for business” he said.

Laleli caught off guard, production stopped

Turkish textile centers Laleli and Osmanbey are the regions that will be most affected by the Russia-Ukraine war. In Laleli, where a crisis desk was created and the number of Ukrainian guests, which was 253 on Thursday, has exceeded 500. The number is increasing day by day. President of LASİAD Gıyasettin Eyyüpkoca stated, “There is close to 3 billion dollars of trade in Laleli region alone. Nearly half of this trade is done with Ukraine and Russia. There is also the issue of open accounts. Some traders have been working with these countries with open accounts for decades. There is an increasing number of cancellations on purchase orders. We estimate that cancellations and postponements will cost around 200 million dollars. This crisis also affected production lines; workshops are at a standstill. There are order cancellations even from Poland because it has a border with Ukraine. Turkey is the primary country that will be most affected by this situation. Half of the market in Laleli is in danger,” he said.

Osmanbey Textile Business People’s Association (OTİAD) President Eda Arpacı stated that after the military operation launched by Russia, they carried out a study on what kind of problems were experienced in Osmanbey regarding purchase orders, shipments, and collections. Arpacı said, “According to the information we received, there are major order cancellations in both countries. Goods cannot be shipped to Ukraine. On the other hand, there are still shipments to Russia but most of them are pending. In the clothing fair took place in Moscow recently, $287 million worth of trade was estimated to exceed $1 billion. During these uncertain times, our priority is to create a peaceful environment without harming tradesmen. Only then will we be able to determine the extent of the damage.”

Translation: Cem Cetinguc