The continuation of the conflict in the Persian Gulf, which is exemplified by the blockage in the Strait of Hormuz, is becoming increasingly difficult to bear, with serious consequences for seafarers, shippers and the world economy, which is having to pay an increasingly heavy price with each day that goes by without a solution.
We have gone past the stage at which it was possible to hope that the situation could return to normal in a few months after a catch-up period. Whatever happens in the next few weeks, the marks left by the crisis will be clear to see over the financial year as a whole via company financial results and inflation. Moreover, the conflict will lead inevitably to shortages of oil products within a few weeks or months, depending on the product concerned. The Persian Gulf countries account for 20% of worldwide production of oil products and 30% of aviation fuel output.
A good hundred container ships were still immobilised in the Persian Gulf in April. Efforts to escape the blockade have not been conclusive. The shipping companies did not have access to corridors secured by credible naval forces.
In the container shipping sector, services via Jeddah and Khor Fakkan have deteriorated but at least they exist in case of emergency. Prices have tripled, however, while delivery times cannot be guaranteed and capacity has been reduced. Demand for capacity to serve the Gulf countries has been reduced, particularly on the reefer market, which is normally very active in the Gulf.
The Emirati port of Jebel Ali, which is ranked 10th in the world for container throughput, is currently trying to catch up for lost time with diverted cargo flows but shippers are having to deal with goods which have been held up, lost or are simply waiting to be delivered. Further collateral damage has been caused by empty containers which are not coming back into circulation. This is preventing the shipping companies from responding to European demand for reefers and Asian demand for dry containers.
At the same time, major operational difficulties at Jebel Ali are delaying ship calls in India and on the east African coast down to the Cape, causing terminal capacity to become saturated.
China has revised its maritime code and, most notably, article 296. Since 1 May, the provisions of the code’s Chapter IV apply to international shipping contracts involving loading or unloading in ports on Chinese territory. China has given itself with new judicial powers just as we see it becoming increasingly irritated by what it considers to be constraints placed on its international trade in the form of US customs duties, attempts to deprive it of terminal capacity at either end of the Panama Canal and the European Union’s draft Industrial Accelerator Act.
The revised version of the code involves a change of model on the part of the Chinese authorities with the aim of gaining greater control over their international sea trade (...)
Beware of optical illusions! Freight rate movements in April can look different, depending on the source used. This is mainly due to the inclusion, partial or total, of exceptional surcharges linked to the crisis in the Strait of Hormuz, mainly to take account of additional fuel charges, war risk insurance cover and port congestion. Upply’s data, which is based on billing rather than on contract prices which have not been revised since the start of the Middle East conflict, shows the amounts actually paid by the cargo side (...)