Container Crisis’ Effects on Turkish Foreign Trade

Container Crisis' Effects on Turkish Foreign Trade

The container crisis started with the pandemic in the seaway, where approximately 90 per cent of global trade is carried out. European freight rates reached record levels. This created a supply opportunity to Turkey. The freight difference between Turkey and the Far East in shipments to the EU has exceeded ten times. For example, the freight of 40 containers from Shanghai to Genoa increased to 8 thousand dollars. The same product can be transported from Turkey to Italy for $700. For this reason, European companies are turning their route from China to Turkey.

The Beginning of the Container Crisis

Towards the end of 2020, when the first pandemic wave ended, there was an explosion of demand in the USA. China, which has normalized since mid-2020, was loaded on the Trans-Pacific line to meet this demand. Then the second wave appeared in the USA. Full ships bound for the USA waited in long queues at the ports. Therefore, empty containers could not return. Hence, the problem of repositioning the container arose in the world. This brought with it the container crisis.

Freight Difference Between Turkey and Far East Increases

In the first week of 2021, the freight difference between Turkey and the Far East has widened in transports to the EU. Far East-Europe freight continued to rise very rapidly. Overcrowding at US and UK ports greatly affected the increase in freight rates. Ships to these areas remained in the open sea. After 20-30 days, they could only dock at the port. This caused the container crisis.

Moreover, it exacerbated the shortage in ship supply. The pandemic has changed the way global companies view their supply chains. This situation has become an opportunity for Turkey.

Turkey Has Faster Delivery

Turkey makes a big difference to the Far East in freight and in terms of delivery times. Shipping times from China to Europe take up to 30 days. However, the same product can transport from Turkey in 5 days. The increase in Turkey’s logistics advantage has enabled some of the EU’s orders to shift from the Far East to Turkey. The expectation that the orders given to the Far East will move to Turkey has already started to come true. Europeans want to buy more goods from Turkey. European customers are looking for suppliers that manufacture in Turkey. For this reason, 2021 is predicted to be a good year for Turkey’s exports.

Before the pandemic, there was the logic of buying the needed product from the cheapest place. However, this logic can put the supply chain in great danger when an extraordinary event occurs. The pandemic has revealed the importance of an alternative supply chain for uninterrupted service. Turkey plays an important role here. Turkey’s proximity to consumer markets provides a great advantage. Because brands now want their suppliers nearby.

Advantage of Container Crisis for Turkey

A product manufactured in Turkey will now compete with a product coming from China to Europe. Because, due to the increase in logistics costs, products from China will no longer be cheap. For this reason, Turkish products of higher quality will begin to become more affordable.

For manufacturers in the European market, delayed procurement of a semi-finished product from China also causes an increase in production costs. Delays hinder production. Here, too, the situation is in favour of Turkey. Countries that will buy semi-finished products from China and make production are shifting their orders to Turkey. The Western world, which has difficulties supplying goods due to global crises, has some of its demands on Turkey.

There is a transportation problem on the sea route. Land overcome this problem. The container crisis primarily affects maritime transport. For this reason, Turkey uses the advantage of transportation by land trucks. Turkey can reach 57 countries in the West and Asia by land. Turkey is less affected by the container crisis by road transport. Thus, it gains an advantage against Chinese products with fast logistics.

Container Crisis Will Affect Some Sectors Positively

Textile Industry

It is predicted that the increase in freight between the Far East and Europe will cause problems in raw material imports. On the other hand, this situation offers an opportunity for orders. In this period, Turkey will be the country where Europe will meet the demand the fastest. The sector expects it to meet a dire need, especially from the second quarter of the year. Seventy per cent of Turkey’s total exports went to the EU. Thus, if there is an expansion of around 10% in the market, it is expected that there will be an enormous increase.

Automotive Industry

The increase in Far East freight prices and the long duration also affect the automotive industry. Therefore, there is a possibility that it will have a positive effect on Turkey. There is a great potential for companies that sell aftermarket products, especially in the automotive industry supply industry.

The Effects of the Container Crisis on the Furniture Industry

The container crisis and Turkey’s logistics advantage also affected the furniture industry. For the last few years, Turkey has been exporting a large amount of furniture to Europe. There are many reasons why Turkish furniture started to be active in Europe. Among them are the logistics advantages of Turkish furniture compared to China, the strength of craft and quality.

Furthermore, Turkey makes in a much shorter time than China. In addition, due to its geographical location, it can reach many markets more easily. Thus, along with the pandemic, there was a shift from the Chinese market to the Turkish market. This shift has gained even greater dimensions with the container crisis.

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