- Foreign shipping firms effect new 60% local tariff hike
- 170 container ships trapped in Strait of Hormuz
- SEREC cautions on new pricing regime
The global oil and maritime trade have again been thrown into a state of flux with the United States and Israeli war against Iran, which escalated on Saturday, claiming casualties and lives of 22 Iranian leaders, their Supreme Leader, Ayatollah Ali Khamenei, inclusive in its wake.
As a result, major trading houses are halting shipments through the strait of Hormuz amid threat from Iranian naval forces, heightening fears of not only a possible shutdown of the waterways with increased hostilities but stirring a significant disruption in the global crude oil, shipping market and international trade supply chain.
Consequently, ocean freight rates that were collapsing at global level before this renewed face off, following return of activities at the Suez Canal after the Houthi rebels hostile attacks at targeted vessels in 2023, are now ticking back up.
In Nigeria, MMS Plus gathered that foreign shipping companies, in a breach of agreement reached with stakeholders and in disobedience to government directive, have begun the collection of the proposed controversial 60 per cent hike in Port Additional Charges and 30 per cent increase in Import Documentation, using the renewed crisis in the Middle East as immediate justification.
However,while it is expected that a sustained freight rates impact will depend on how long the Strait of Hormuz remains shut,marine insurers have responded swiftly with war risk notices for some policies already cancelled. In other cases, prices have dramatically risen in the wake of the strikes.
To mitigate risk,the United States has established a maritime warning zone in the Persian Gulf, Gulf of Oman, North Arabian Sea, and the Strait of Hormuz.
“The establishment of the warning zone is intended to provide notice that dangerous military operations are taking place from within these locations and the U.S. Navy cannot guarantee the safety of neutral or merchant shipping,” explained Jakob Larsen, Chief Safety & Security Officer at BIMCO. “Commercial shipping is advised to navigate with caution and avoid navigation within this zone, if possible.”
In response, Mediterranean Shipping Company(MSC), Hapag-LIoyd, CMA CGM and Maersk have formally announced suspension, ordering ships to seek safe shelters, and outright rerouting of vessels.
In a statement issued on Sunday, MSC stated, “As a precautionary measure, MSC has suspended all bookings for worldwide cargo to the Middle East region until further notice.”
Also, the Gemini partners, Maersk and Hapag-LIoyd have issued customer advisories announcing the rerouting of selected services involving Middle East/India to Mediterranean and US East Coast trades from the Trans-Suez route to the Cape of Good Hope, citing “unforseen constraints arising from the wider operating environment in the Red Sea region”.
So far, reportedly over 700 merchant vessels,comprising 170 container ships, totaling 450,000 teu(about 1.4 per cent of the global fleet); oil tankers and bulk carriers were stuck inside the Strait on Sunday, facing difficulty of exiting.
Carriers had been returning selected East-West services to Suez Canal transits in recent months after sailing around the Cape of Good Hope, South Africa, since late 2023 because of attacks by Iran-backed Houthi militia.Those plans will now be shelved, said a shipping analyst.
Cape of Good Hope which currently absorbs around 2.5m teu of global container shipping capacity has longer sailing distances.
A large-scale return to the Red Sea would have freed up this capacity, slashed transit times and potentially see freight rates reduced drastically. With that prospect off the table now, according to LIoyd’s List Intelligence, rates on major global trades will continue to reduce but not fall as low as previously expected in the Q2 of the year.
According to Associated Press,Houthi forces in Yemen have reportedly decided to resume attacks on commercial shipping in the Red Sea. And the first strike could be imminent.
Meanwhile, an official of the National Association of Nigerian Shippers on Thursday, last week, confirmed to MMS Plus that the multinational shipping firms in Nigeria had activated the collection of the rejected controversial tariff increase.
The port economic regulator, the Nigerian Shippers’ Council(NSC) had directed the foreign firms to suspend the implementation of the new tariff regime as earlier approved following pockets of protests against it by stakeholders, who complained that they were not consulted and engaged as statutorily required before implementation.
The NSC cautioned against effecting the new tariff regime without reaching a consensus with freight agents, shippers, manufacturers, and other stakeholders.
But the shipping companies have brazenly flouted the order issued by the regulator, in a subtle affront and display of operational audacity.
The new tariff regime increased the Import Documentation Fee for 20-foot container from N45,000 to N58, 500 as the 40-foot container rose from N72,000 to N93,600.
In the same vein, Port Additional Charges for 20-foot container increased from N50,000 to N80, 000, while charges for 40-foot container moved fromN100,000 to N160,000.
Reacting to the conflict at the Middle East,Sea Empowerment and Research Center(SEREC), in a strategic maritime and economic advisory, observed that “Any prolonged disruption could trigger sustained oil price volatility, freight rate escalation, war- risk insurance spikes, and global inflationary pressure.”
It therefore predicted a global commodity pricing out look as well as the emergent macro-economic variables in event of a sustained tension at the gulf region.
The SEREC advisory signed by its Head of Research, Dr. Eugene Nweke, forecasted that oil prices may range between $110-$140 per barrel.
MMS Plus reports that as of the time of filing this report, Brent crude traded at $72.87 per barrel, while West Texas intermediate sold for $67.02 per barrel. Nigeria’s Bonny light crude was going for $78.62 per barrel.
Global freight rates could increase by 15 to 40 per cent due to rerouting and risk premiums, says SEREC, even as “Marine war-risk insurance may surge to between 200 and 400 per cent in high risk corridors”.
Emerging economies may face renewed inflation and currency depreciation risks, while Nigeria in particular could harvest $18 to 22 billion annually from oil revenue with its crude sold at $120 per barrel, stirring a GDP of 1-1.2 per cent in the short term.
SEREC warned however that the spiral boom could attract a backlash of 3-5 percent inflation driven by logistics and imported input costs. Exchange rate volatility could intensify while food and transport prices may escalate sharply .
