Turkish miners are seeing their profit margins fluctuate
daily, with the Turkish lira swinging wildly against the
After a long period of stability since the
country’s financial crisis a year ago, volatility
has returned to the Turkish lira, with gains or losses of as
much as 5% by the day.
On March 22, the lira fell from TRY5.47 to $1, to a low of
TRY5.83 to $1. The currency then changed direction, swinging to
new highs of TRY5.36 to $1 by March 26.
At the time of writing, the currency stands just above
recent lows, at TRY5.65 to $1. Other than the March 22 dip,
this is the lowest the currency has been since October
This weakness is good news for miners, who sell their
material in dollars but pay local costs in Turkish lira. Turkey
is a major producer of a number of minerals, including barite,
soda ash, magnesia, chromite and feldspar.
The volatility is being driven by concerns over the
country’s economy and a high rate of
The country’s president, Recep Tayyip Erdogan,
has spoken out against both inflation and high interest
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 foreign currencies.
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
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
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 profit
"It has gone one way… that’s good for
us, but it could go the other," a barite miner told
A soda ash trader said that the lower currency would be good
"All in all, a weak Turkish lira should help companies [as
regards] labor costs. The minimum wage was around $520 when the
dollar was around TRY3.5 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.