Gulf Trade Crisis: Freight Rates Surge Amid Tensions

The escalating tension in the Middle East has locked down Turkey's Gulf route, which serves as a $50 billion foreign trade gateway. With the closure of airspace, shipments have come to a standstill, while war surcharges have tripled freight rates in maritime transport. Crossings at Gürbulak have been extended to two days, and exporters are facing order cancellations.

The rising tensions in the Middle East have paralyzed transportation along the Gulf route, where Turkey has a foreign trade volume of approximately $50 billion. The region, which includes Iraq, the United Arab Emirates (UAE), Saudi Arabia, Iran, Qatar, Kuwait, Oman, and Bahrain, accounts for about 11% of Turkey's total exports. The trade volume, nearing $30 billion in exports and hovering around $19.6 billion in imports, has begun to show the first signs of impact under the shadow of war. As order cancellations come in one after another, cargo arriving at ports is being held without being loaded onto ships.

With the closure of airspace, transportation has nearly come to a halt. Turkish Airlines (THY) has canceled flights to Iran, Iraq, Syria, Lebanon, Jordan, Qatar, Kuwait, Bahrain, Saudi Arabia's Dammam line, and the UAE until further notice. Managers from Asset, one of Turkey's leading customs consultancy and logistics groups, stated to EKONOMİ, 'Currently, airspace is closed in the Middle East. Airlines like Emirates and Etihad can only fly with instant permits to clear existing cargo in warehouses. New bookings are completely closed. With passenger flights halted, capacity has shrunk, and even if tickets are purchased, flights are continuously postponed.'

Industry representatives warn that a potential closure of the Strait of Hormuz would shift cargo from sea to air, which could drive freight rates to astronomical levels. Some exporters have begun to withdraw their goods due to uncertainty.

A full cost shock is being experienced in maritime transport. MSC, COSCO, and OOCL have halted new cargo acquisitions on certain routes, while CMA CGM and Hapag-Lloyd have redirected to the Cape of Good Hope instead of the Suez Canal. Domestic shipowners like Turkon have implemented war surcharges. Burak Kerimoğlu, Maritime Director of Asset GLI, explained the cost increases: 'As of Monday morning, lines have started to announce 'War Risk Surcharge' and 'Emergency Conflict Surcharge.' For example, a $2,500 freight from India has an additional cost of $5,000. The total figure has tripled. This situation has created a 'brake' effect on exporters; as of today, we are receiving cancellations indicating that even cargo that has entered the port is being abandoned before being loaded onto ships.'

The crisis in road transport has centered around the Gürbulak Border Gate. Due to the bombing of the passport control point on the Iranian side, transactions are being conducted manually. Officials from UND (International Transporters Association) state that the crossing time at the border has increased from 24 hours to 48 hours. The freight rate for Iran, which was $250, has risen to $1,000 due to security risks. The reluctance of drivers to go to this route due to safety concerns is deepening the crisis. Approximately 400 vehicles waiting in truck parks are also experiencing difficulties in fuel supply. The processing volume at the gate, which normally sees 550 vehicles a day, has halved. Currently, there are no issues with road transport to Gulf countries.

Despite the grim picture in transportation, there is a 'cautious optimism' in the tourism sector. TÜROB President Müberra Eresin, speaking to EKONOMİ, acknowledged that the crisis has caused a slowdown among Gulf tourists but emphasized Turkey's position. Eresin stated, 'Tourism is a peace sector; it is natural for people to feel uneasy. However, Turkey is currently one of the safest destinations in the world. We see that travel plans at the Berlin fair are shifting towards Turkey in search of a 'safe haven.' The sector will recover quickly.' Representatives from the Antalya-based tourism sector also noted a slowdown in reservations.

Industry representatives evaluated the situation for EKONOMİ.

Öksüz: 20% cancellations in purchasing delegations

■ Ahmet Öksüz, President of the Istanbul Textile and Raw Materials Exporters' Association (İTHİB), stated that there has been about a 20% cancellation in special foreign purchasing delegations at the Texhibition Fair, but this has not disrupted the overall picture. Öksüz noted that cancellations were only seen in organized purchasing delegations, saying, 'There are no issues with the thousands of individual visitors. The number of foreign visitors is at the same level as last year. If there had been no cancellations, we would have exceeded that.' Öksüz pointed out that cancellations are more pronounced in the European market, but emphasized that American buyers' interest continues. He expressed that Turkey's geographical proximity to Europe could create more advantages with the expectation of rising freight costs, and the increase in raw material prices could also create new activity in the market. Reminding that the sector faced contraction after increased capacity investments during the pandemic, Öksüz stated that companies need to operate more efficiently and close to full capacity at this point. He noted that if the current process is analyzed correctly, it could turn into a new opportunity for Turkey in the European market.

Kileci: 'If we read the process correctly, Turkey could emerge advantageous'

■ Fikret Kileci, Coordinator President of the Southeastern Anatolia Exporters' Associations (GAİB), stated that the war and tensions in the Middle East directly affect Turkey and that the process carries both risks and opportunities. Kileci expressed that potential disruptions through the Strait of Hormuz could increase freight and energy costs, negatively impacting global and European trade. He warned, 'If we do not read this process correctly, we will repeat the mistakes we made during the pandemic. We should not assume short-term increases are permanent and direct new capacity investments.' Kileci highlighted that Turkey is currently the safest port in the region, which could create advantages in logistics and trade. However, he cautioned against opportunism, stating, 'We should not raise the price of a job we do for 10 lira to 20-30 lira just because there is a crisis. If we do not price correctly, short-term gains will lead to long-term losses.' Kileci acknowledged that cancellations and declines are natural but noted that new demands are also emerging in a panic environment, emphasizing that the process should be evaluated with both its negative and positive aspects.

Kıvanç: Closure of Hormuz would lead to a global supply shock

■ Zeki Kıvanç, Chairman of the Adana Chamber of Industry, stated that the escalating tensions along the US-Israel-Iran line have reached a critical threshold for the global economy with the potential closure of the Strait of Hormuz. Kıvanç reminded that approximately 20% of global oil consumption and 25% of liquefied natural gas trade occurs through this route, stating, 'The closure of this passage means not only price increases but also physical supply disruptions, creating a permanent energy supply shock.' He noted that the rapid rise in energy prices would increase production, industry, and logistics costs, triggering a new wave of inflation, which poses a serious risk for the global economy already progressing in a slow growth and high-interest environment post-pandemic. Kıvanç remarked that the increasing inflationary pressure could delay interest rate cuts planned by the US and European central banks and could even bring the tightening process back onto the agenda. He emphasized that the impact would be more sensitive for Turkey, noting that every permanent $10 increase in oil prices due to external dependency in energy raises the current account deficit by approximately $2.5-3 billion and increases inflation by about 1 percentage point.

Aydın: Expectations for orders from Europe and shares from Asia

■ Orhan Aydın, President of the Anatolian Lions Businessmen's Association (ASKON), stated that the rising tensions in the Middle East could present new opportunities for Turkey, especially in labor-intensive sectors. He expressed that Turkey responds to crises more controlled compared to Europe, thanks to its strong industrial infrastructure, raw material production capacity, and accumulated know-how. Aydın stated, 'Just like during the pandemic, Turkey could again achieve a positive position,' adding that developments in the Strait of Hormuz have caused delays on the East Asia-Europe route. He emphasized that this would highlight Turkey's geographical advantage. Aydın noted that there has been a price increase of around 12-13% in petrochemical products sourced from Iran since the onset of the war, stating that strategic investments made in recent years have reduced external dependency on certain raw materials in Turkey, making the country more resilient. He pointed out that although some concerns have arisen at fairs, Turkey is not at the center of the crisis, stating, 'In lightweight but bulky products, we can receive orders from Europe and especially gain shares from Asia due to logistical advantages.'

Şahinler: Price increases have begun

■ Murat Şahinler, President of the Turkish Home Textile Industrialists and Businessmen's Association (TETSİAD), stated that the closure of the Strait of Hormuz could have serious consequences for global trade. Reminding that a significant portion of the world's oil passes through the region, Şahinler said, 'Even a week's blockage creates a huge impact. Price increases have begun.' He noted that they are in contact with industrialists in the Far East, stating that freight prices have sharply risen in a very short time. 'Freight rates in the $2,500-$3,000 range have jumped to $5,500-$6,000 within 3-4 days. Prices have nearly doubled,' Şahinler remarked, noting that this directly reflects on costs. He stated that they do not currently see a direct wave of cancellations or postponements towards Turkey, saying, 'At the moment, there is no serious action from our customers. However, the effects may change depending on the developments in the region.'

AYSEL YÜCEL / İMAM GÜNEŞ / Ekonomim.Com

Source: SeaNews Türkiye