Turkey’s shipbuilding industry, once a global leader in specialized vessels, is experiencing a significant downturn. Exports have plummeted due to escalating production costs, difficulties in securing financing, and heightened global competition. This decline, marked by a 40% drop in March 2025 exports, is forcing shipyards to confront severe challenges, including job losses and a loss of competitive edge.
Turkish Shipbuilding Industry Navigates Troubled Waters as Exports Sink
Turkey’s shipbuilding sector, which saw a 33% surge in exports to $1.94 billion in 2023 and surpassed China in tugboat manufacturing, is now facing a stark reversal of fortune. The industry, known for its high-tech, special-purpose vessel construction, is grappling with a sharp decline in exports, with a 40% plunge in March 2025 alone. This downturn is primarily attributed to a confluence of rising operational costs, a strained financing environment, and intense international competition.
Key Takeaways
- Export Decline: Shipyard exports decreased by 27.5% in the first quarter of 2025, totaling $328 million, and dropped 40% in March alone compared to the same period in the previous year.
- Rising Costs: Production costs in Turkey have escalated to levels comparable to Norway, a key export market, making Turkish shipyards less competitive.
- Financing Strain: Banking regulations restricting lira loans and increased interest rates on foreign currency loans have severely limited access to affordable financing for the sector.
- Job Losses: Employment in the industry has fallen by nearly 10% over the past seven months across more than 80 active shipyards.
- Loss of Competitiveness: The removal of VAT exemption on equipment imports and labor costs for export-focused vessels under 24 meters has further eroded price competitiveness.
- Relocation of Investments: Some leading Turkish shipbuilding companies, such as Tersan and Hicri Ercili, have begun acquiring shipyards overseas to counter declining domestic market conditions.
Factors Contributing to the Decline
The Turkish shipbuilding industry’s struggles stem from several critical factors:
- Soaring Production Costs: Increases in raw material prices and wages have driven up production costs, making Turkish vessels less attractive on the global market. Cem Seven, president of the Ship, Yacht and Services Exporters’ Association (GYHİB), noted that Turkey can no longer compete on pricing even with countries like Spain.
- Financing Difficulties: New banking regulations, particularly those restricting lira loans to exporters holding significant foreign currency, have forced the sector to rely on more expensive foreign currency loans. Additionally, a cap on monthly increases for foreign currency loans has driven up interest rates and slowed credit availability.
- Regulatory Changes: A government regulation issued on October 31, 2024, eliminated the Value Added Tax (VAT) exemption on equipment imports and labor costs for export-focused vessels under 24 meters in length. This move significantly weakened the sector’s price competitiveness.
- Increased Global Competition: Despite a global boom in demand for new specialized ships, particularly for the green transition, Turkish shipyards are losing orders to competitors, especially in Europe.
Impact and Future Outlook
The downturn has led to significant job losses, with employment falling over 5% in the past three months and nearly 10% over the last seven months. The industry’s service exports, estimated between $1.5 billion and $2 billion annually, are also under threat, with international vessels opting for maintenance and repair services in Bulgaria, Greece, and Romania instead of Turkey.
Industry leaders have revised export forecasts downward, with Cem Seven projecting a contraction of over 15% in the sector’s exports by the end of the year. To regain competitiveness and ensure sustainable growth, the “Ship and Yacht Building Sector’s 2023 Sustainable Export Action Plan” emphasizes focusing on environmentally friendly and high-tech vessel construction. The sector aims to lead in electric and hybrid boat production by 2026 and in alternative-fuel vessels by 2030, targeting net-zero emissions production and global leadership in specialized ships by 2050. However, achieving these goals will require significant investment in technology, innovation, and attention to worker welfare and environmental protection.
Sources
- Turkey’s shipbuilding industry struggles as exports decline due to rising costs, Turkish Minute.
- Turkish shipbuilding exports plunge 40 pct in March amid rising costs, financing strain, Turkish Minute.
