Global transport costs could rise on higher energy prices

Where around 100 vessels a day passed through the Strait of Hormuz before the US and Israeli attack on Iran on 28 February, cargo traffic there has now largely come to a standstill. The closure so far had little effect on container rates on other routes. Global transport costs could, however, be impacted by rising energy prices. Meanwhile this week the Drewry World Container Index rose 8%.UKMTO has reported 16 attacks on vessels and four suspicious incidents in the Arabian Gulf, the Strait of Hormuz and the Gulf of Oman since 28 February.With support from President Trump, the US International Development Finance Corporation plans to introduce a maritime reinsurance facility to safeguard shipping through the Strait of Hormuz. The programme would insure up to about $20 billion in potential losses on a rolling basis, initially covering hull, machinery and cargo, aiming to restore confidence and keep flows of oil, fuel, LNG and other key commodities moving.Data platform Freightos expects few carriers to take up the offer without naval protection, adding that the government is more likely to devote these resources to oil tankers than to container shipping.Closure of the Strait of Hormuz has not yet disrupted the container marketThe closure of the Strait of Hormuz has not yet disrupted the container market or pushed up rates. Congestion at Far East transhipment hubs could cause some delays for non-Gulf cargo in the near term, but Freightos expects the impact to be far smaller than during the early stages of the Red Sea crisis, as volumes are lower and carriers have already suspended new bookings to the region.Transport costs worldwide could, however, be affected by rising energy prices. Rabobank outlines three scenarios for energy prices and economic growth. In its baseline scenario, the bank assumes the conflict will last several weeks and that the Strait of Hormuz — through which roughly a fifth of global oil and gas supplies pass — will only be partially closed for a limited period. Oil prices would average $86 per barrel in March and April, while gas on the TTF futures market would average €52 per megawatt hour before falling again from the summer onwards. Economic growth would come in at 1.4%, slightly below the 1.5% expected before the conflict.In the second scenario, shipping through the strait comes to a complete halt, causing severe shortages on energy markets. In the third scenario, key oil refineries and gas facilities in the region are damaged so badly that they remain out of operation for years. In Rabobank’s most severe scenario, oil prices rise to $150 per barrel and gas to €125 per MWh. Prices would then remain above the levels seen in scenario 2 for years, with oil staying above $110 per barrel and gas above €100 per MWh. Dutch economic growth would fall to 0.6% this year, the bank said.Advice from Dutch logistics industry association EvofenedexThe Dutch logistics industry association Evofenedex advises considering shipping sea freight to ports in Oman or the Red Sea, and then transporting it onwards by rail or truck to destinations in the region. Examples include the ports of Muscat, Sohar and Salalah (Oman), which have connections to the UAE, Saudi Arabia, Qatar and Kuwait, among others. According to the organisation, the port of Aqaba in Jordan could also serve as an alternative for transport to Saudi Arabia, Iraq or Israel. “A multi-port strategy can help maintain flexibility,” Evofenedex said. “Cargo can be unloaded at ports around Oman or the Red Sea, temporarily stored at terminals and then shipped onward using smaller vessels. This can help limit congestion at busy ports.” For air freight, the organisation advises using multiple transshipment hubs to spread risks. “Consider airports in countries where airspace has reopened, as well as hubs outside the region to limit operational risks.”Drewry World Container Index rose 8% The Drewry World Container Index rose 8% driven mainly by higher rates on the Asia–Europe route and increases on Transpacific routes. After double-digit growth on the Transpacific last week, Asia–Europe rates posted a similar rise this week. Spot rates on the Shanghai–Rotterdam trade route increased 19%. Drewry expects further increases in the coming weeks.