Turkey has increased the fee for the passage of ships through the Bosphorus and Dardanelles Straits by 8.3% and will now revise it annually, at the end of June. In October last year, fees have already been raised five times. By the end of the year, Turkey's revenues from the transition from the Black Sea to the Mediterranean could grow from $160 million to $900 million.
How can this affect the export flows of Russian steel products?
Indeed, in October last year, Turkey increased the fee for the passage of ships through the straits for the first time since 1983. Less than a year later, another increase of 8.3% to $4.42 instead of $4.08 per ton of cargo is being carried out. And such indexing of fees threatens to become annual.
At the same time, Turkey is not the only country that is reviewing the fee for the passage of ships through its straits. Since January 2023, new tariffs have been in effect on the Suez Canal: the Egyptian authorities have increased fees from bulk carriers and tourist vessels by 10%, and from all other vessels by 15%.
The main reason for the increase is the high rates of global inflation, which reached 7.5% in 2022. Although its pace is decreasing this year, it remains as high as ever, and by the end of May 2023, global inflation is already 5.2% in annual terms.
Another reason for Turkey's increase in fees for the passage of ships through the straits is the growth of cargo traffic, which is almost 70% higher than the threshold level. On average, over the past 5 years, about 42 thousand ships have passed through the Bosphorus, one fifth of which are oil tankers. Increased risks last year have already forced the Turkish government to tighten the requirements for the insurance of ships passing through the straits.
However, the current increase in the passage fee will not have a significant impact on the cargo flow through the straits, because alternative routes are much more expensive due to the incomparably higher transport distance. And since the current increase affects all cargo carriers and shippers, this will affect the contract prices for metal products, which will now be formed taking into account the new tariffs.
In the long term, the competitive advantages of steel industry will undoubtedly be determined by the availability of alternative transport routes.
Russian companies have the opportunity to transport steel products along the new North-South route passing through the Caspian Sea to India, but the underdevelopment of the river infrastructure increases the delivery time and affects the cost, which hinders the popularization of the route.
The shortage of ships and port infrastructure hinders the development of the "Northern Sea Route" - another (so far theoretical) alternative for the supply of steel products to Asia.
