More expensive shipowner fees, inflated insurance policies, more time at sea, less equipment available and likely more expensive fuel. António Nabo Martins, executive president of the Association of Freight Forwarders of Portugal (APAT), predicts more troubled times for shipping companies after attacks in Iran
The world has returned to where it was exactly one year ago when Iran, faced with the scale of tensions with Israel, first threatened and then announced that it had closed the Strait of Hormuz. The attacks by the US and Israel in the early hours of Saturday brought instability once again to one of the most important regions in the world for oil exports.
Speaking to CNN Portugal, António Nabo Martins, executive president of the Association of Freight Forwarders of Portugal (APAT), guarantees, regarding the Strait of Hormuz, that “no one has yet understood for sure whether it is closed or not” even after the announcement by the Iranian Revolutionary Guard that the crossing was banned. The maritime logistics specialist explains that “the information [vinda de quem está no terreno] It’s still a bit contradictory.” “It’s not actually closed, what I know is that almost no ships are there,” he explains.
As for the ships that were trapped beyond Hormuz after the crossing closed, the president of APAT recalls that “there were some that managed to turn back and leave” that closed sea. “I don’t know how the others will do it, but probably for now, they will remain there waiting for some outcome”, he details.
António Nabo Martins highlights, however, that late on Sunday afternoon, shipowner companies announced that they would begin applying extraordinary fees to vessels whose route crossed this area of the globe in light of the recent escalation of tensions in the region.
20.1 million barrels of oil pass through the 53.5 km that separate Iran from Oman per day or, to put it another way, every 24 hours 1.29 billion euros of oil pass through there. After the attacks, as Marine Traffic’s timelapse demonstrates, 70% of maritime traffic in the strait stopped.
Strait of Hormuz traffic drops sharply amid regional escalation
Vessel activity in the Strait of Hormuz has shifted materially following recent US strikes on Iran and the subsequent regional escalation. According to real-time traffic analysis, transits through the chokepoint…
— MarineTraffic (@MarineTraffic)
António Nabo Martins explains that most transporters have already shown signs that they are considering diverging routes and starting to travel around the Cape of Good Hope. “This means that we will have more transit and travel time”, he says, remembering that this change may not be so much related to the sudden increase in rates, but to security issues.
The decision to exchange the Strait of Hormuz for the Cape of Good Hope will delay, on average, between 15 and 20 days of transit for all these vessels, predicts the president of APAT. More time traveling necessarily requires more fuel and a cut in the number of transports carried out per month, which makes each transport more expensive and which, at the end of the economic chain, will be paid for through an increase in the price of consumer goods.
In addition to the Cape of Good Hope hypothesis, another possible route would be through the Red Sea, off Yemen, towards the Suez Canal, but the president of APAT recalls that this is a route that “never became normalized” since the beginning of attacks by Houthi rebels against vessels in the Bab al-Mandeb Strait, in response to the war in the Gaza Strip.
“Although it calmed down a lot, it never got back to normal and now we’re back to that phase of expectation again. We’re back to the cat and mouse phase”, he says.
One-fifth of all the world’s maritime oil trade passes through the Strait of Hormuz (Getty)
In addition to shipowners’ fees, Antonio Nabo Martins highlights that, given the escalation of tensions, the cost of insuring the ship and cargo is also expected to increase. The specialist recognizes that he does not yet have concrete data on these increases, but, on the same day, the (FT) informs that the new policies should contain, on average, 50% more houses.
Sources cited by the FT on condition of anonymity and familiar with the matter estimate that “for a 100 million dollar ship the increase is between 250 thousand dollars (approximately 214 thousand euros) and 375 thousand dollars (approximately 321 thousand euros) per trip”.
Despite the answers given to CNN Portugal based on the vast knowledge about maritime logistics, António Nabo Martins recognizes that “it is very difficult to try to anticipate” what will happen in the coming days, because it will depend a lot on the individual decisions of the carriers. “It’s an internal decision, it’s a decision for each of them, and it has a lot to do with the international situation”, he explains.
One thing remains certain: “The Strait of Hormuz was never effectively closed”, not even during the war between Iran and Iraq in the 1980s. More than 40 years later, the Iranian threat is, was and, taking into account the recent past, will always be the same, but it was never fulfilled.
Even so, combining 20-day longer journeys, increased shipping fees, inflated insurance, reduced availability of equipment such as containers that spend more time at sea and possible drops in oil and fuel exports, Antonio Nabo Martins believes that we will have a new “increase in the price” of maritime transport, which inevitably ends up being paid by the end consumer through generalized inflation of some goods.
