While the main disruption comes to the Middle East, with major shipping hubs and routes being inaccessible, we have already seen the start of the knock-on effect on the global industry. While the Red Sea has not become fully operational since the rerouting of vessels in 2023 the developing US-Israel and Iran conflict has prolonged the rerouting of vessels, around the Cape of Good Hope, maintaining the current delays on normal shipping times.
The new security threats in the Strait of Hormuz have forced shipping lines to suspend vessels sailing through the Persian Gulf. This affects key hubs such as Jebel Ali Port in Dubai and adds further disruption to ships on this route. With the Strait of Hormuz being ‘one of the world’s most important oil choke points’, this has caused severe disruption to the movement of global oil.
The knock-on effect of these delays will likely cause rates to increase due to an increase in supply and demand, with ships not making it to ports as quickly, meaning there are fewer empty containers becoming available for shipments waiting to depart. With space being tight, this could also interfere with schedules being allocated as quickly.
What we know:
Whilst the rerouting of vessels decreases the number of empty containers available, there have been reports of shipping lines looking to increase freight rates in mid-March to help manage capacity.
With the threats on the Strait of Hormuz adding uncertainty to the global movement of oil, UK hauliers have implemented an emergency fuel surcharge of 10%. Continued disruption could also increase bunker fuel costs for the shipping lines.
Due to uncertainty in the industry, cost increases will depend on how well regular services can run. While we have already seen direct effects on schedules in India, if the shipping lines can keep on top of running regular services, it should keep price increases to a minimum.
Based on what we know currently, we are estimating shipments to increase in cost by around 20%. This is to be taken as a very rough guide to help importers plan for upcoming shipments. Unfortunately, it is impossible to predict the exact cost fluctuations caused by the disruption.
Any shipments that have already been quoted for this month through Shippo will be honoured. However, any future quotes may be subject to the increase caused by the current disruption. If you have any questions, feel free to contact your advisor or call us on 0203 384 0498 to discuss further.