Middle East peace deal eases shipping costs, but trade disruption lingers
Reading Time:2minutesShipping lines have reacted quickly to the announcement of a Middle East peace deal with cuts to hefty fuel surcharges – but direct services to the region could still be months away. The. . .
Reading Time:2minutesShipping lines have reacted quickly to the announcement of a Middle East peace deal with cuts to hefty fuel surcharges – but direct services to the region could still be months away. The United States and Iran were expected to formally bring the conflict to an end over the weekend, with the reopening of the Strait of Hormuz being a key feature of the deal. A fifth of global oil production passes through the narrow waterway, which is also the most direct route to New Zealand’s sixth-largest export market, in the Persian Gulf. Logistics company Kotahi negotiates freight rates for significant exporters to the region, including Fonterra and Silver Fern Farms. Its chief executive, Emma Parsons, said shipping lines had added as much as $8000 to the cost of carrying a container to the region in the early stages of the conflict as fuel and insurance costs spiked. “Some containers leaving NZ wouldn’t be worth that much which made [that trade] completely prohibitive,” Parsons said. Fuel surcharges are now coming down in line with falling oil prices which dipped below US$80 a barrel last week, she said. Data published by the Ministry of Foreign Affairs and Trade shows dairy exports to the Gulf states fell 30% in March and April while meat was down 59% and horticultural exports down 79% compared to the same months a year ago. With access to the Persian Gulf cut off after the closure of the Strait of Hormuz in February, shipping lines had to unload containers at Omani ports on the southern side of the Arabian Peninsula. From there containers were trucked overland to the United Arab Emirates, Qatar and Bahrain. For exports to Saudi Arabia, cargoes had to make a six-week detour around the Cape of Good Hope. Parsons said it would take time for ships still plying this longer route to become available again for direct services to the Persian Gulf. Shipping lines will also want to be sure their vessels are safe from mines and other threats before re-entering the Gulf. “You could be talking several months before things are back to normal,” Parsons said. The Gulf States usually account for 7%-10% of apple exporter Mr Apple’s global sales but that share will be lower this year. Its head of sales and marketing, Ben McLeod, said some sales bound for the Gulf had been diverted to China at the start of the conflict. He said Iranian drone strikes on Omani ports drove it to look for alternative routes, including through the Panama Canal. More recently it had been trucking containers from the UAE port of Khor Fakkan on the eastern side of the Strait of Hormuz. Costs had been shared with customers. “It is a slight increase in cost but is certainly a lot better than going via the Panama Canal and twice around the moon,” McLeod said. He said he had no idea when direct services into the Gulf would resume. “Our customers want the more direct option but who knows if that is going to be next week or next year?”Meat exporter ANZCO’s general manager for sales and marketing, Rick Walker, said there are also questions about what lingering impact the conflict might have on demand for NZ’s primary products. Energy infrastructure has been damaged and could take some time to bring fully back online. “It is not just oil revenues, but consumption in places like Dubai has been suffering because no one is going there on holiday,” Walker said.