Turkey slashed electricity supplies to industry after Iran announced a temporary halt in natural gas exports, disrupting production and sending markets plummeting.
Officials from state-run pipeline company Botas were dispatched on an emergency mission to Tehran to try to reverse the stoppage, which led to Turkey’s worst energy crunch in decades and threatens to clobber all-important exports. The Turkish government has imposed three days of power outages this week in hundreds of organized industrial zones.
Industry accounts for nearly a quarter of Turkey’s economic output, and nearly 10% of the country’s workforce is employed in industrial zones, so the consequences of the power halt could ripple nationwide. More than half of the country’s electricity is produced in gas-powered plants.
Electricity supplies were cut after Iran, a major supplier of gas to Turkey, announced a 10-day halt on Thursday, citing technical failures. Turkish officials speaking to Bloomberg on condition of customary anonymity said gas flows haven’t resumed.
The fallout from the supply limitations was swift. Multiple companies announced disruptions in their operations in filings to the stock exchange, and the domestic unit of car maker Renault SA announced it would stop production at its Bursa plant for 15 days, according to reports in the Turkish press.
Turkey’s automotive sector, already hurt by the global chip shortage, is the country’s top exporter, accounting for 11% of all exports in 2021.
Turkish stocks slumped, led by industrial companies, with the benchmark Borsa Istanbul 100 index falling as much as 4.95%—just short of triggering a market-wide circuit breaker. Steelmaker Erdemir dropped 5.9% while oil refiner Tupras fell 6.3%. Glassmaker Sisecam declined 5% and carmaker Ford Otosan was down by 6.4%.
“In case of a production halt in industry, many costs will remain and some industrial plants don’t have the flexibility of easy start and stop,” say analysts Eser Ozdil and Meral Gulcan, in a report published by Glocal Group. “In order to fully meet demand in freezing weather, Botas must receive two or three more spot shipments” and use its floating liquefied natural gas storage units at full capacity, it said.
The fuel supply disruptions come as Turkey struggles to cover the surging cost of gas imports with a badly weakened lira. Turkey had 1.2 billion cubic meters of gas in storage as of Jan. 18, 42% less than a year earlier, according to Energy Exchange Istanbul data.
The country’s natural gas consumption hit a record high on Jan. 20 and the energy crunch could get worse in the coming days as temperatures fall further below seasonal norms, bolstering demand for gas just as supply is squeezed by Iran.
The government has pledged that households wouldn’t be affected by blackouts and restricted gas supplies.
