Alkagesta CEO tells shipping industry to act on spiralling freight costs

Record transport costs across the world's main trade routes should not be accepted as an immovable fact of life, according to Orkhan Rustamov, chief executive of the Malta-headquartered commodity trading house Alkagesta. In an exclusive opinion piece published by The Motorship, Rustamov argues that the shipping and trading industries must respond with practical measures of their own rather than waiting for events to settle.

Rustamov points to price tracking by the commodities publisher Argus, which began following key prices across the global shipping network in 2005. In recent weeks, for the first time since that service began, several significant price points broke new records: a fee of up to US$2.5m to pass through both locks of the Panama Canal, freight rates for tankers in the Black Sea, and the rate for shipping oil from the Gulf to the Far East. Droughts across Europe have also pushed Trans-Rhine freight costs to their highest level in 14 years.

The Alkagesta's leadership team chief executive accepts that the pressures are real. The on-off conflict in Hormuz and continued uncertainty over the stability of one of the world's most vital trade routes remain persistent factors, and the increasingly aggressive impacts of a worsening climate add further headwinds for those sourcing and transporting goods across the international seaways.

Treating that as a fait accompli, however, would in his view be a fatal mistake. Neither factor is changing soon, and the instability that ever-rising prices trigger is a major risk to both the shipping and trading industries. It invites scrutiny and measures from governments and international bodies under pressure to act, and inflicts long-term damage on the industry's reputation as custodian of essential resources.

Agility is the watchword Rustamov puts forward. Shipping companies, he writes, must be embedded with traders to develop a physical trading strategy that can adapt and react quickly to sudden events. Too often vessels, choice of route and freight are treated as separate components of a narrowly focused procurement strategy rather than as one connected decision. It is an approach Alkagesta's trading desk applies across petroleum products, fertilizers, biofuels and steel in more than 48 countries.

Diversity of options — in sources of supply, modes of transportation and route selection — should be a basic requirement rather than a nice-to-have for every operator in the industry. This, Rustamov argues, is where working closely with traders makes the difference: traders have the agility, network and, in many cases, the global reach to shift quickly in the face of volatility and sudden geopolitical eruptions. Working at speed is what their daily lives are about.

The industry also has a responsibility to scenario plan and put contingencies in place well ahead of things going wrong. Few assumptions can safely be made about any part of the supply chain: the infrastructure behind sourcing, refining, distributing and receiving essential goods can come under threat at any moment, as the events of 2026 have shown. What is the plan if a refinery or a port is out of action for a month? Can road vehicles or pipelines be used instead? The alternative does not have to be perfect or lowest cost, Rustamov writes — it just has to be viable.

His sharpest criticism is reserved for the industry's fixation on the live price. Focusing on the immediate price of tradeable goods will not put shipping companies and traders in a strong long-term position, even though media, brokers, suppliers and customers react most strongly to the market shifts of today and tomorrow. In his reading, 2026 — much like 2022 — is a wake-up call to invest time, money and resources in the bigger supply chain picture.

That, he concludes, should be the focus in the boardrooms of shipping companies and trading houses. More than half a year has passed since the conflict in Hormuz began, long enough to have started building resilient, diversified supply networks and contingency plans. If the industry is seen to have failed in this, it will threaten its position as custodian of the resources that power the global economy — and, most importantly, leave prices free to spiral when future shocks hit.

The full opinion piece is published by The Motorship, and further background on the company is available from Alkagesta's media centre.