The attack on Iran launched over the weekend by US and Israeli forces (Operation Epic Fury) has triggered an unprecedented shipping crisis in the Gulf region, with the de facto closure of the Strait of Hormuz.
The closure of the strait separating Iran from the Musandam Peninsula effectively takes 20 million barrels of oil a day (one fifth of global consumption) off the market and reduces global supplies of liquefied natural gas (LNG) by 20%.
Carriers have been taking action. MSC has suspended all bookings for shipments to the Middle East region. The move reflects growing concerns about the safety of trade routes in an area that is crucial for international maritime transport. As of yesterday afternoon, over 300 ships were grouped in areas outside the Strait, half of which were oil tankers or ships used to transport liquefied natural gas.
Suspending bookings until further notice suggests that the world’s leading shipowner doesn’t believe the conflict is likely to end soon.
MSC is not alone. CMA CGM has also expressed concern about the crisis. It has instructed all its ships in the Gulf to seek shelter, suspending traffic through Suez until further notice, with immediate re-routing to the Cape of Good Hope.
The French carrier has also introduced new surcharges to deal with the emergency situation: “Amid the ongoing developments in Iran and across the Arabian Peninsula, precautionary measures have been taken to safeguard operations in the affected areas,” the liner stated in a customer advisory, adding: “We understand these measures may impact your logistics and supply chain operations; however, they are necessary steps that also lead to additional operational costs. Accordingly, we hereby inform you that, effective March 2nd and until further notice, an Emergency Conflict Surcharge (ECS) will apply.” The surcharge will be $2,000 for 20-foot dry containers and $4,000 for 40-foot containers bound for or originating from: Iraq, Bahrain, Kuwait, Yemen, Qatar, Oman, United Arab Emirates, Saudi Arabia, Jordan, Egypt, Djibouti, Sudan, and Eritrea.
Maersk has also suspended transits through Suez and redirected its shipments to the Cape of Good Hope, both along routes between India, the Middle East and the US East Coast (Middle East Coast Loop) and on those connecting India, the Middle East and the Mediterranean (ME11).
Vespucci Maritime CEO Lars Jensen expects large containerships carrying goods bound for the Gulf to unload their cargo in Salalah, Sohar and Duqm (Oman); Khor and Fakkan (United Arab Emirates), or in the port of Colombo (Sri Lanka) to avoid attacks in the Strait. He points out that these ports could become bottlenecks for goods awaiting smaller vessels willing to risk transiting through the area.
Over time the situation could get even worse, with congestion problems throughout the Asian region, with direct repercussions on Singapore, Tanjung Pelepas and Port Klang. The military escalation in the area could convince carriers to avoid the Persian Gulf and use these ports to store containers originally destined for Gulf ports (such as Dammam, Doha or Umm Qasr).
The problem is that there is a lack of feeder ship capacity immediately available to transport all this cargo to the Middle East. The yards at the Singapore terminals, where most vessels bound for Europe or the US via the Cape of Good Hope stop to refuel, are already nearly 90% full.
Vessels waiting in the harbour to find a free berth could experience delays that could increase to such an extent that they affect the entire supply chain.
Spot rates for goods being sent to the area are expected to increase significantly over the next few weeks.
“Although containerised freight flows are less dependent on the Strait, its closure at the same time as the Red Sea crisis risks exacerbating supply chain risks, isolating Gulf ports and forcing carriers to reroute or suspend their services,’ Antonella Teodoro, senior transport consultant at MDS Transmodal, told Port News.
According to the market analyst, this crisis effectively exposes the region’s dependence on a limited set of maritime corridors for both exports and essential imports, highlighting the fragility of its port-centric economic model. She warns that “any long-term disruption risks having repercussions that extend far beyond the Gulf, affecting major Asian energy importers, global oil and gas markets, container shipping routes and the resilience of the European energy transition — all of which highlights the urgency of diversifying supply chains and investing in alternative connecting routes.”
Translation by Giles Foster
