The global movement of goods via ocean freight has, thus far, remained largely unshaken by the war in Iran—though the impacts of the conflict may not yet be fully felt.
According to data from online shipping marketplace Freightos, the first week of the war saw many bookings suspended, which raised alarms that trade could become increasingly constrained in the weeks to come. However, “Operationally, the closure of the Strait of Hormuz for ocean freight is really just a disruption for containers meant to go to or from the Gulf states,” Judah Levine, the group’s head of research, told Sourcing Journal.
Levine said that bookings have resumed now that ocean carriers have developed alternate routes, many headed to India and onward to alternate ports or those accessible in the Gulf. Other than Jebel Ali Port, located in Dubai, there are others East of the Strait, including some in Oman and Jeddah Port, located in the Northern Red Sea.
“So from that perspective, there have been a lot of surcharges, and it’s much more expensive, but those containers now are starting to move,” Levine said. “I don’t think it will be in the volumes that they normally would see; I assume it’s more critical [cargo] that’s going through, because once they get there, they have a very long transit to get to where they’re going.”
Those surface lanes aren’t built to take over the traffic that Jebel Ali would typically handle, and congestion may ramp up at the alternate ports, “but for the for the broader container market, there really have been no reports of operational disruption,” he added. So far, cargo headed from the Far East to the Middle East, which could have been diverted to Malaysia, Singapore or Sri Lanka, hasn’t caused backups in those markets.
“There was anticipation that that would cause congestion there, and that would impact other lanes, especially like Asia, Europe, but so far… that seems not to be the case,” Levine said. In fact, “It seems, in general, the overall global market is not being impacted.”
What is changing are costs, however. Carriers have announced fuel surcharges as the price of oil exceeded $100 per barrel for the first time in four years. Maersk last week touted a $200-per-container surcharge, and MSC said it would similarly jack up its rates in mid-March. Levine said other surcharges are also taking shape, “like peak season surcharges or emergency surcharges.” MSC said it would implement a war risk surcharge of up to $4,000.
“So those are quite significant, and those will start being introduced in the short term,” Levine said. “The question is whether the rates will take, because there are still market dynamics about supply and demand—about whether shippers are going to accept it, or whether there will start to be differences between carriers and competition and rates will come down.”
Asked whether those added costs will scare off shippers—or when that might occur—Levine said he believes there will be somewhat of a readiness to accept higher prices, at least until they become prohibitive. “If it reduces the volumes that people are going to are going to ship, then, that might be an actual disruption to the overall freight [market],” he said. “Otherwise, you’ll see stuff moving—it’ll just be more expensive, like what we saw during Covid” when some were willing to pay up to $20,000 per container for essential cargo.
Noel Hacegaba, CEO of the Port of Long Beach, said the gateway (which, along with its Los Angeles sister port, handles the highest volume of cargo of any in the United States) has not seen fluctuations in its activity since the war began.
“At present I can tell you that there are no impacts to operations in the San Pedro Bay, where all terminals are open and cargo continues to move fluidly,” he said during a webinar this week. “But because this is a strategically important region, the ripple effects of this conflict have far reaching implications for trade routes around the world,” he added, noting that about 20 percent of the world’s oil supply moves through the Strait of Hormuz, amounting to about 130 ship transits per day.
“Conflict disrupts commerce, and this conflict is sending tremendous tremors through the trade network,” he added. The conflict broke out shortly after the Supreme Court’s landmark decision regarding President Donald Trump’s International Emergency Economic Powers Act (IEEPA) tariffs, “adding another layer of complexity to the ongoing trade uncertainty,” the POLB CEO said.
But as for direct impacts to the California port’s operations, Hacegaba appeared confident that they could be avoided. “Here at the Port of Long Beach, only about 1 percent of our imported petroleum last year came from Iraq via ships that passed through the Strait of Hormuz,” he said. During the first two months of this year, the port brought in 5.8 million barrels of petroleum from Iraq, however, most of the oil arriving at the Long Beach gateway comes from Alaska, Canada, Mexico and Colombia.
As such, “Cargo operations at the Port of Long Beach continue unabated,” he added. In spite of the situation in the Middle East, he said the port expects to see “a relatively flat ebb and flow of cargo for the rest for the next three months, followed by a bounce half of the year.”
“Even though the Port of Long Beach is not experiencing any immediate effects from the Middle East conflict, we should remember that the global supply chain is interconnected,” he added.
