Turkey to hike Black Sea straits transit fee, impact on freight seen as minimal

Turkey has increased the price for transit through the Dardanelles and Bosporus straits, the only way to move cargoes from the Black Sea to the Mediterranean, by five times to $4/mt from $0.8/mt, according to local media, citing the Turkish ministry of transport.

According to the Montreux Convention signed in 1936, Turkey can charge lighthouse, rescue and medical fees from ships passing through the Bosporus and entering and leaving the Dardanelles.

This is the first time the country will have increased fees since 1983.

The calculation of the fees was originally made in francs, which were accepted by the United Nations as the gold franc, and switched to US dollars based on the Turkish lira exchange rate when the franc was removed from circulation.

According to the Daily Sabah, increasing inflation has led to Turkey undercharging for transit through the straits, and it estimates the current hike will boost the country's income from straits transit to $200 million from $40 million.

However, while the increase sounds significant, trade sources said the impact on freight rates would actually be minimal, with the biggest estimate for small vessels indicated at around $1/mt, falling to as low as 25 cents for capesize-vessels.

According to ISM, a freight analytical agency based in Ukraine, total costs for a handy-size carrier of 31,500 deadweight tonnage (dwt) and 11,200 net register tonnage (NRT) passing through the Turkish straits passage will be $21,630 more, or an additional $0.68/mt per dwt cargo in freight equivalent.

For grain cargoes using panamax or kamsarmax vessels, it will increase by $33,000-35,000, or around $0.5-0.55/mt per dwt cargo.

Given the current freight ideas, the share of these fees is less than 1% of the total freight rate and will therefore not have a huge impact on shipping costs.

Turkey has abolished the payment system which was settled in 1983 and used to be paid in French franc which was set at $0.8/mt, but amid inflation, Turkey decided to increase it to  $4/mt, which according to the estimation should increase the income from 40 million dollars to 200 million.