SHANGHAI : Businesses around the world are confronting a painful – and potentially long-lasting – rise in costs amid the US-Israel war on Iran, as global shipping firms introduce steep price increases to offset a mounting fuel crisis.
In Shanghai, one of the world’s busiest ports, the price of shipping a container has already surged dramatically since the start of the war, according to the Shanghai Containerised Freight Index – a gauge tracking spot rates across 13 global trade lanes out of the city.
The index has nearly doubled from 1,333.11 points at the end of February to 2,571.73 on Friday, meaning that prices have increased from about 1.3 times the benchmark level set in 2009 to more than 2.5 times that level.
A similar trend is visible in another major benchmark: maritime consultancy Drewry’s World Container Index, which monitors freight rates across East-West sailing routes.
Spot rates have been climbing for four consecutive weeks and now stand at US$2,800 per 40-foot container, up from US$1,899 in late February, according to Drewry data released on recently.
Prices are expected to rise further in the coming weeks, according to Drewry, as the early peak season for global shipping approaches and the fuel crisis continues with no end in sight. Shipping firms have been hit particularly hard by the global energy shock triggered by the closure of the Strait of Hormuz, with the price of very low sulphur fuel oil (VLSFO) – the fuel used by most commercial vessels – rising even faster than Brent crude prices in recent months.
Average VLSFO prices at the top 20 global bunkering hubs – where ships refuel – reached US$843.5 per tonne on Friday, a US$256 increase from March 2, according to data from trade media outlet Ship & Bunker.
“We are looking at an extra cost bill of half a billion dollars a month,” Vincent Clerc, CEO of shipping giant Maersk, told CNN in early May. The company had to pass on the extra costs, otherwise it would be “completely unsustainable for us”, he added.
Even if the Strait of Hormuz reopens, it may take longer for fuel prices to drop than many expect, marine fuel supplier and trader Dan-Bunkering warned in a report.“We expect oil prices to be in the US$80 to US$100 [per barrel] range in the third and fourth quarters, assuming the Strait of Hormuz has reopened,” Dan-Bunkering said. “That is far above the level before the war.”
Oil giant ADNOC said in mid-May that even if the war ended now, oil flows would not be fully restored until the first – or possibly even the second – quarter of 2027.
Source : China Economy
