Turkish miners are seeing their profit
margins fluctuate daily, as the Turkish lira swings wildly
against the dollar.
After a long period of stability since the
country’s financial crisis a year ago, volatility
has returned to the Turkish lira over the last week, as it
gains or loses up to 5% by the day.
On March 22 the lira fell from 5.47 to the
dollar, to a low of 5.83 to the dollar. The currency then
changed direction, swinging to new highs of 5.36 to the dollar
by March 26.
At the time of writing the currency stands
just above recent lows, at 5.65 to the dollar. Other than the
March 22 dip, this is the lowest the currency has been since
This weakness is good news for miners, who
sell their material in dollars but pay local costs in Turkish
dollars. Turkey is a major producer of a number of
minerals, including barite, soda ash, graphite and chrome.
The volatility is being driven by concerns
over the country’s economy and a high rate of
inflation. The country’s president, Recap Tayyip
Erdogan, has spoken out against both inflation and high
Pressure on the lira is coming from both
short-selling in the foreign exchange markets and a move by
Turkish citizens to convert lira-denominated savings into
At the same time the currency has been
supported by interventions which are rapidly burning through
the Turkish central bank's foreign currency reserve.
Data released by the Turkish central bank
on March 28 showed holdings of foreign currencies by Turkish
residents jumping by more than 11% since the start of the year,
to $164.8 billion.
Attempts by the government to shut foreign
speculators out of the market by restricting access to the
currency has caused the cost of borrowing lira to spike and
then subside over the last week.
Other government interventions, including
price interventions and pressure on state banks to lend, has
only exacerbated the volatility.
Exporters told Fastmarkets they would not
rush to adjust prices despite the recent improvement in their
"It has gone one way…
that’s good for us, but it could go the other," a
barite miner told Fastmarkets.
A soda ash trader said that the lower
currency would be good for profits.
"All in all a weak Turkish lira should
help a bit [all] companies in the means of labor cost. The
minimum wage was around $520 when the dollar was around 3.5
lira and now it is as low as $380."
"Other than the workers, the company
itself should be happy momentarily," he said, noting that they
it reduced the burden of local-currency denominated debt.