MANILA, Philippines — Importers should start pricing in what could be one of the steepest hikes in freight costs in recent history, as the Philippines absorbs the impact of disruptions in the Strait of Hormuz, where some of its energy inputs sail through.
Philippine Ports Authority (PPA) general manager Jay Santiago has warned traders of a price hike in freight services arising from worsening tensions in the Middle East.
As such, he said importers would be hard hit given that the Philippines is already one of the costliest economies in Southeast Asia to ship to, averaging $5,300 to bring in an imported container.
Santiago said the country is exposed to uncertainties in the Strait of Hormuz, where 20.3 million barrels of oil go through every day, according to the US Energy Information Administration. The strait is one of the most important trade routes for petroleum exports from Gulf states.
Iran has been attacking vessels attempting to pass through the Strait of Hormuz, part of the country’s retaliatory moves to the coordinated offensive by the US and Israel last Saturday.
Santiago said Philippine oil imports pass through the Strait of Hormuz, so any supply disruption is expected to push up bunker costs and freight rates.
Shippers may begin charging more if Iran continues to attack logistics hubs like the Port of Jebel Ali, the largest container terminal in the Middle East that briefly suspended operations after fire broke out when missile debris fell on it.
Santiago said cargo throughput in domestic ports may decline if importers reduce their orders on higher costs.
“Our exposure is primarily crude oil, refined petroleum products and LNG. There are also some petrochemical and fertilizer imports, and limited containerized cargos from Gulf transshipment hubs like Jebel Ali; the bulk of the strategic exposure is energy-related,” Santiago told The STAR.
“There are no direct operational routing issues on our ports, but any disruption will affect freight rates, bunker costs and, eventually, cargo volumes. If freight rates go up, trade volume will drop because of higher transport costs,” he added.
In a 2024 study by logistics consultancy blueFocus Infrastructure Advisors, the Philippines was flagged for imposing one of the highest shipping costs in Southeast Asia.
The study said the average cost for importing a container in the country is $5,300, equivalent to roughly 10 percent of the value of goods inside.
In comparison, Philippine logistics costs are 50 to 250 percent higher than some of its regional neighbors like Indonesia, Malaysia, Thailand and Vietnam.
“Freight rates to the Philippines can be 50 percent to 250 percent higher compared to its regional counterparts. Imbalance surcharges might be a key factor in this difference, typically invoiced to local consignees as part of destination charges,” the study read.
The economy is also largely dependent on imports for fuel products and raw materials. Last year, the PPA recorded a six-percent increase in cargo throughput to 307.64 million metric tons due to higher orders for construction materials and petroleum products.
The growth enabled the PPA, a state-owned firm, to generate a record P30.09 billion revenue, leading to a profit of P8.27 billion, up by 13 percent from 2024.
Prior to the attacks on Iran, Philippine cargo volume was expected to grow further, driven by the private sector’s aggression to beef up inventories for local demand.
It remains to be seen when Iran will wind down its retaliatory attacks, especially as it is avenging the death of Ayatollah Ali Khamenei, its leader since 1989, who was killed in the US-Israel offensive.
