How the Iran war could shake up global shipping routes
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The grounding of ships around the Gulf and the paralysis of the Strait of Hormuz represent a significant upheaval for a wide range of sectors beyond hydrocarbons.
PHOTO: REUTERS
WASHINGTON – The US-Israeli military operation against Iran and Tehran’s retaliation are disrupting global maritime traffic
The grounding of ships around the Gulf and the paralysis of the Strait of Hormuz, a critical narrow waterway bordered by Iran and Oman, represent a significant upheaval for a wide range of sectors beyond hydrocarbons.
Here is how shipping could be impacted:
Fertilisers at risk
About 33 per cent of the world’s fertilisers, including sulphur and ammonia, transit through the Strait of Hormuz, according to the trade analysis firm Kpler.
Loaded onto cargo ships in Qatar, Saudi Arabia or the United Arab Emirates, these fertilisers have diverse destinations ranging from India and China to Brazil and African countries.
“There are no viable alternatives” to shipping in the Gulf, Kpler said in a June analysis, noting “land routes are limited by pipeline and trucking capacity”.
Since a large portion of fertilisers are manufactured using massive amounts of petrol or oil, the surge in hydrocarbon prices caused by the conflict with Iran could have a domino effect on fertiliser prices.
Plastic production
The conflict in the Middle East also threatens a major polymer export hub in the United Arab Emirates, according to an analysis published on March 2 by consulting firm Argus Media.
The firm said the region produces up to 23 million tonnes of polyethylene – one of the most widely used plastics in the world – annually, representing 15 per cent of global production.
On March 1, the Emirati port of Jebel Ali, central to the export of petroleum derivatives, caught fire, according to the local authorities.
Another port facility in Kuwait had to temporarily suspend operations after debris fell nearby, according to local media.
Extended shipping routes
Several of the world’s major shipping companies have announced they are avoiding the Strait of Hormuz
Insurers have significantly increased their rates for ships transiting the Middle East.
Under these conditions, navigating the Gulf is becoming prohibitively expensive or impossible for cargo ships.
According to Armateurs de France, a shipowners association, 60 ships flying the French flag or belonging to French companies are currently stranded in the Gulf.
Danish company Maersk and French company CMA CGM have suspended transits through the Strait of Hormuz, as well as transits through the Suez Canal, which connects the Red Sea to the Mediterranean Sea.
Those ships must now circumnavigate Africa to reach Europe from the Middle East and Asia, a detour of several thousand kilometres.
Food risks
The shipping conditions also disrupt the arrival of cargo to the Middle East, a region that relies in part on food imports.
Many transports pass through the Strait of Hormuz.
During a June 2015 US military operation in Iran, for example, entire shipments of rice destined for the region were blocked in India. AFP
