Turkey's construction sector driving growth in mining and construction machinery and equipment

As Turkey’s economy and population have expanded, growth in its construction sector has benefitted from the existence of a vibrant domestic industry for manufacturing machinery. According to 2013 data from the Turkish Construction Equipment Manufacturers and Distributors Association (IMDER), the construction and mining machinery and equipment (CMME) sub-sector posted the second-fastest growth in the world between 2005 and 2013, after China. Turkey’s CMME industry is the ninth largest in the world.

Exports

According to a 2014 report on the industry by the Ministry of Economy (MoE), CMME accounts for around 16% of Turkey’s machinery production value. The CMME sub-sector also exported $1.6bn worth of equipment in 2013, with Germany, Romania, Iraq, the UK and Iran the main markets. Since 2002, all Turkish exported machinery has also borne the “CE” label, identifying it as meeting EU standards for quality.

Broken down by type and value, spare parts came in first among exports within the CMME subsector in 2013, responsible for $553m, followed by machinery for sorting, separating, screening, washing, crushing and grinding minerals, with $407m. Other important export items included bulldozers, angle dozers, grazers and excavators, at $162.2m, and lifting, handling, loading and unloading machinery, at $156.6m. Growth in these export figures has been impressive. The total stood at $927.5m in 2009, showing growth of $668m, or 72% over five years, at current prices.

The MoE numbers further show that some 500 companies are engaged in the manufacture of CMME, nationwide. Around 60% of all of these firms are in the Marmara and Aegean regions, located close to the sites of major work and good transportation links. Further supporting the sector are several related industries. Automotives has long been a major part of the Turkish economy, with many international companies active in the country via joint ventures with locals (see Industry chapter). At the same time, the steel and non-ferrous metals industries are long established, providing locally sourced materials for CMME manufacture. Plastics too are a local industry, as are glass and synthetic rubber. There is also a pool of experienced and qualified staff, with CMME manufacturing, which tends to require a much higher technical and research and development capacity than many other kinds of manufacturing, able to count on good-quality local hires. In addition, Turkey offers 21 free zones with a range of tax exemptions for industrial and manufacturing companies. All this has facilitated CMME growth.

Demand Up

Yet the scale of the boom in the domestic construction sector, with giant projects such as the third Bosphorus bridge and the new Istanbul airport, has meant that the domestic CMME subsector has been unable to keep up with demand. The latest figures available, for 2012, show that there was a demand for around $2bn of CMME domestically that year, with a 37% annual hike in demand since 2009. In consequence, imports of CMME have begun to increase, with around half of all new demand since 2009 being met by these. A major opportunity exists too for the development and manufacture of small-sized construction equipment, given that a lot of the domestic demand is for projects in existing areas. The government’s urban regeneration project, which seeks to demolish and rebuild or upgrade 6.5m housing units over a 20-year period, creates a huge demand for such equipment.

Much of the expertise for the manufacture of small-scale CMME has already been developed, with the sub-sector looking for investment to boost capacity and reach. Such investments also have lower capital requirements than those for the manufacture of larger units. The industry, therefore, faces some of the same challenges and opportunities as the Turkish market as a whole: there is solid domestic demand and a strong need for foreign investment to meet that demand in a sustainable fashion. In the meantime, however, this sub-sector is set to continue to expand, with many of the cranes towering over the world’s construction hotspots already bearing the “Made in Turkey” trademark.

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The Report: Turkey 2015

Construction & Real Estate chapter from The Report: Turkey 2015

The Report: Turkey 2015

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