Speaking at the 18th SteelOrbis "New Horizons in Steel Markets" annual conference, which took place in Istanbul on Tuesday, November 28, with approximately 600 participants, Hakan Çendik, chairman of the Turkey-based Association of Coaster Ship owners and Operators (KOSDER), explained the reasons for the sharp rise in freight rates during 2020-23 and shared his expectations for the coming period.
Mr. Çendik pointed to several factors behind the gradual increase in freight rates observed during the pandemic. The first of these was increasing demand for commodities from China and the Far East, which are in a relatively better situation and whose production has returned to normal, compared to the countries whose production has shrunk and closed down. Accordingly, since the exports of Far Eastern countries increased much more than their imports, the supply-demand balance was disrupted and transportation became one-way. Also, shipowners decreased the number of voyages and port calls and this was another factor in the increase in freight prices, while the slowdown or delay in unloading and loading operations at ports due to the decrease in workforce during the pandemic also contributed to this situation. On the other hand, Russia's additional tax on grain exports in 2021 and many ships being held at Ukrainian ports due to the Russia-Ukraine war and the low water level in the Panama Canal were other developments that affected freight rates. Mr. Çendik stated that two new regulations put into effect by the International Maritime Organization (IMO) also caused an increase in freight rates. In this context, the requirement of the usage of a new type of fuel which is less harmful to the environment and the obligation to make ships compatible with it caused ships to stay in yards for one to two months. Another regulation was the Ballast Water Treatment System. The time lost due to ships' compliance with these two regulations led to backlogs in shipyards. As a result of these developments, dry cargo and container freight rates increased sharply.
The KOSDER official stated that the dry cargo and container markets closed the first nine months of this year with a decline, adding that he does not have much hope for the year ahead. He said that there was a tendency among market players to seek to preserve their positions in 2024. According to Çendik, with the new regulation that will come into force in 2024 to reduce the flue gas emissions and carbon emissions of ships, there will be confusion in the market about taxes. Stating that the purchase and installation of compulsory equipment will continue to increase ships' operating costs, he pointed out that high fuel prices are also adding to this situation. In short, he stated that freight rates are not expected to be very low for the short term.