For anyone involved in the import business, the conflict in the Middle East is having an economic impact. The war has negatively affected the maritime supply chain.
As the war, which began after the US and Israel jointly attacked Iran, enters its third week, the effective closure of the strategic ‘Strait of Hormuz’ for shipping has caused turmoil not only in the oil and gas industries but also in global transport via container ships, the symbol of worldwide trade.
Emmanuel Benichou, a French importer of garden furniture sourced from China and sold online, expressed concern about the war’s impact on the prices of goods.
“Our prices have not increased yet, but if the war continues for months, we will either have to reduce our profit margin or increase our prices,” he told AFP.
According to UK maritime consultancy Clarksons, quoted by Bloomberg, the Middle East accounted for only 9.8 percent of global container trade last year, but in a world of complex trade relations, the chaos caused by the war has had repercussions worldwide.
Iran’s effective blockade of the ‘Strait of Hormuz’ has obstructed thousands of commercial cargo ships, meaning they cannot reach the right ports on time.
Rodolphe Saadé, CEO of maritime transport company CMA CGM, told the French newspaper Le Figaro, “Goods destined for Saudi Arabia have ended up in India.”
The situation is further exacerbated by the fact that passenger ships in the Gulf have been targeted.
According to the UK Maritime Trade Operations (UKMTO) and other sources, 20 commercial vessels have been attacked since the US-Israel conflict against Iran began on February 28.
Additional Costs
The blockade imposed by Iran in the Strait is forcing transport companies to levy surcharges on shipping, as the route, which handles about 20 percent of global oil and liquefied natural gas (LNG) trade, is affected by rising fuel prices.
“Both CMA CGM and its competitor Hyundai Merchant Marine (HMM) have increased prices due to the war,” Benichou said. “HMM is imposing an additional surcharge of $230 more per container in emergency fuel surcharge,” he said, adding, “CMA CGM is charging an extra freight of $155 per container.”
He said, “My business knowledge has taught me ‘how to buy and how to ship’ goods during a crisis.”
His company, Aosom, imports 400 containers monthly. “I know how to take advantage of shipping opportunities,” he added.
He stated that he does not hesitate to take advantage of opportunities when shipping companies offer discounts on freight rates with extra capacity during peacetime. Conversely, during busy times just before the Chinese New Year, extra fees always have to be paid, but he takes advantage of the trade benefits, saying he ‘strikes while the iron is hot.’ However, they usually return to normal quickly.
Now, shipping prices are starting to rise. He stated that the cost of a container sent from Asia to Europe has increased from $2,500 before the war to $4,000.
Most container ships are first required to avoid the ‘Red Sea’ and the Suez Canal due to the fear of attacks by Iran-backed Houthi rebels in Yemen. He noted that this makes the route to Europe longer and fuel costs significantly more expensive.
Container Load
Benichou said, “If the war drags on, he fears additional surcharges for security risks, ship obstruction, insurance, and the storage of goods stranded far from their final port.”
In the Middle East, shipping companies have started using lorries to deliver containers to their destinations. They are also rerouting ships towards Europe and Africa and searching for alternative ports on new corridors.
Container ships heading to the Gulf can no longer reach the important port of Dubai, so cargo must be unloaded at another port in the United Arab Emirates, Khor Fakkan, far from the Strait of Hormuz.
“The risk is that containers get stuck in congestion, blocking port terminals and causing major delays,” wrote French newspaper Le Monde, quoting Vincent Clerc, CEO of the giant shipping company Maersk.
To some extent, this brings back bad memories of the Covid pandemic and revives fears of a collapse in the global supply chain. Benichou recalled the bitter reality of shipping costs rising to $14,000 per container during the Covid era.
