Houthi attacks on ships in Red Sea cause negative impact on Turkey’s exports and imports

Ongoing Houthi attacks in the Red Sea, backed by Iran due to the Israel-Hamas conflict, have significantly impacted Turkey’s foreign trade. The escalation of these attacks has led to a delay of over a month in raw material and intermediate goods imports, causing a twofold increase in logistic costs for exporters. This disruption has particularly affected the chemical and automotive sub-industries.

The transit costs through the Suez Canal have surged three to fourfold due to Yemen-based attacks, with container freight to Saudi Arabia’s Jeddah Port skyrocketing from $700 to $4000. This substantial increase, especially impacting low-cost products like flour, has resulted in significant freight expenses. Furthermore, the rerouting of ships entering the Red Sea and subsequently turning back has added to empty return freight costs, with 700 containers currently awaiting transportation to Saudi Arabia in Gaziantep.

POSTPONEMENT OF EXPORTS DUE TO LOGISTIC PROBLEMS

The rise in freight costs has led to the postponement of some export loads due to logistic problems. Observations indicate a decline in export orders, particularly from Gulf countries, as buyers face the burden of freight exceeding $4,000 compared to the previous $500. The absence of a direct service from Saudi Arabia’s Jeddah region to Turkey compounds the challenges, negatively affecting trade with that region.

FOREIGN SELLERS REFRAIN FROM QUOTING PRICES

Difficulties in obtaining prices from foreign sellers for imports have also contributed to a surge in domestic prices. Businesses relying on raw materials, especially in the import of unprocessed foods, are experiencing challenges. Delays in the shipments of various legume products in February-March, due to foreign companies being unable to determine prices, have prompted the consideration of suspending import burdens.

The confluence of increased freight and rising commodity prices in the new year is anticipated to create a significant market gap. The core issue lies in foreign sellers not providing prices, potentially fueling further inflation in the domestic market if this situation persists. The complex interplay of these factors poses significant challenges to Turkey’s economic stability.