A CHAOTIC YEAR: 2022

HÜSEYİN CAHİT SOYSAL
UGM Board Member

2022 was beneficial neither to the world nor to Turkey. The COVID-19 pandemic, which started in late 2019, is still effective and threatens human health with its new versions. In addition to natural disasters, the Russia-Ukraine War in our region has been wreaking havoc on the two countries for about a year. Trade wars, embargoes, and high customs tariffs initiated by developed countries against other developed countries also negatively affect the global economy. The logistics industry is also experiencing its "new normal" processes during such a period.

Reflecting on the unprecedented year of 2022, we witnessed a series of catastrophic events. In March, a devastating 7.3-magnitude earthquake struck Fukushima, Japan. This was followed by Hurricane Ian, which brought Cuba and Florida to a standstill in September. The same period saw Pakistan grappling with severe floods that claimed the lives of 1700 people. And as if these were not enough, we also faced the aftermath of summer forest fires that left us reeling.

THE RUSSIAN-UKRAINE WAR IN OUR REGION…

The COVID-19 pandemic, which originated in late 2019, continues to pose a significant threat to global health with its evolving variants. Adding to the turmoil, the Russian-Ukraine War has been a persistent source of unrest in our region for over a year, with its geopolitical implications yet to be fully understood. The ongoing instability in Syria and Iraq further compounds the situation, keeping Turkey on high alert against the menace of terrorism.

CHIP CRISIS IN AUTOMOTIVE AND ELECTRONICS…

As if these disasters and wars were not enough, trade wars, embargoes, and high customs tariffs initiated by developed countries against other developed countries also negatively affect the global economy. Due to the "Chip Crisis," production declines are occurring in the automotive and electronics industries.

In such a period, the logistics industry began to experience its own "new normal" processes. It is possible to list the changes in this field as follows:

BRENT OIL INCREASES TO 130 DOLLARS

- The most striking change in the new period occurred in fuel prices. After the Russia-Ukraine War, Brent oil barrel prices jumped from 98 dollars to 130 dollars. In the first months of the year, these high prices increased transportation costs significantly. Rather than bear high freight costs, European countries shifted their orders to countries such as Türkiye, which are "close suppliers." Nowadays, Brent oil barrel prices have fallen to 81 dollars. At their lowest level of the year, these prices will inevitably reduce transportation costs, and orders from the Far East will become attractive again.

CONTAINER RENTS RISE TO 12 THOUSAND DOLLARS

- Again, the needs accumulated after the COVID-19 epidemic have created an enormous demand explosion. Therefore, the demand for containers has increased in the world. Container rents, which were not easy to find, have risen to 12 thousand dollars. As a result, European customers again directed their orders to nearby countries such as Türkiye. However, increasing container demand also triggered container production. Nowadays, there is no difficulty in supplying containers, and container freight rates have also decreased. For example, Shanghai-Alexandria container freight decreased from 12 to 5 thousand dollars. For this reason, Türkiye could not maintain its "close supplier" advantage for a longer time.

REDUCTION OF ORDER QUANTITIES AND VOLUMES

- The insecurity created by the war led people living in Europe to save more than usual without spending. For this reason, product orders are also made in smaller batches in quantity and volume. When orders dropped below a container volume, close-range transportation shifted from sea to road transportation, which is more prone to partial load transportation.

WHEAT CRISIS ON A GLOBAL LEVEL…

- Russia and Ukraine provided 25 percent of the global wheat need. When both countries mined their coasts during the war between the parties, maritime transport in the Black Sea was paralyzed. A global wheat crisis began to occur because the products kept at the ports of both countries to be sent to wheat-importing countries could not reach their buyers on time. Prices increased on wheat exchanges. Food shortages began to occur in some countries. When the situation became critical due to the initiatives of the United Nations (UN) and Türkiye, the parties agreed to open a mine-free "wheat corridor" in the Black Sea. Ships loaded with "bulk wheat" from Odesa Port were first directed to Istanbul and then to the ports of the importing country, with the road safety accompaniment provided by Turkey. Likewise, Ukrainian armed forces did not attack Russian ships loaded with wheat during their voyages in the Black Sea. Thus, Türkiye undertook a critical humanitarian mission and completed the transportation operation to prevent a global food crisis.

WAREHOUSES IN TÜRKİYE ARE FULL-CAPACITY

- It is a known fact that politics and business do not always go hand in hand. No matter how heavy the embargoes the USA, the EU, and their allies impose on Russia, firms in these countries do not want to lose their Russian partners with whom they have previously traded and suffer losses due to the stock accumulation due to the war. Trade is evolving from direct to indirect transportation, somehow finding the waterway. In this context, customs warehouses in Turkey started to operate at total capacity last year. Likewise, there has been an increase in Russian transportation.

RUSSIA RELAXES PESTICIDE CONTROL AND QUOTAS

- After the war, Russia relaxed its strict pesticide controls on imports of fresh fruits and vegetables of Turkish origin; It delegated this control authority to some extent to the Turkish Ministry of Agriculture and Forestry. In addition, Russia increased its tomato quota for Turkey from 300 thousand tons to 350 thousand tons. Therefore, additional capacity began to be used in Russian transportation.

CLOSING OF THE BULGARIA-ROMANIA-MOLDOVA-UKRAINE ROUTE

- Before the war, TIR trucks carrying cargo to Russia and Belarus used the "Bulgaria - Romania - Moldova - Ukraine" route. When this route became unusable after the war, vehicles with Turkish license plates started to use the Georgia route. However, Georgian gates were "built to handle 400 - 500 truck operations per day" on both sides, and public officials were organized accordingly. When the western gates were closed, all trucks carrying cargo to Russia had to turn to these gates. In addition, Western countries told Georgia, "Inspect these trucks with Turkish license plates carefully. Let's see if they violate our embargo decisions." When I gave this instruction, the entry and exit times from these gates began to extend due to the physical examinations. Subsequently, Russian officials stated that the number of vehicles waiting to enter the Russian Federation through the Yarag-Kazmalyar Gate between Georgia and Russia exceeded 3,000. That processing times were extended due to "the gate built to handle 250-300 vehicles per day and insufficient personnel.". It was understood that the waiting times on the eastern route would not decrease as long as the war ended and the western route did not start operating.

In short, 2022 was neither beneficial to the world nor to Turkey. I hope that the year 2023 will be free of wars, natural disasters, and epidemics. It will be a year when the people of my country and the whole world tend to live in peace and prosperity.