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Strait of Hormuz: How is the conflict impacting Hapag-Lloyd?

The conflict over the free flow of trade through the Strait of Hormuz is one of the hottest issues right now on the global political stage. Hapag-Lloyd liner services are also among those that regularly pass through this strait between Oman and Iran. Below, we explain how Hapag-Lloyd is reacting to the tense situation.

The Iranians are threatening a blockade, the British are considering sanctions, and the American are bolstering their military presence in Saudi Arabia. Since the attack on a tanker in June, the Strait of Hormuz has once again become a political hotspot – and one having repercussions on the container shipping industry worldwide.

Bottleneck in the Persian Gulf

Just 33 kilometres separate Oman and Iran at the narrowest point of the Strait of Hormuz, and the navigation channel is even narrower. Ships heading in either direction only have a three-kilometre-wide band to operate in, which makes the waterway a bottleneck in terms of traffic. Any vessel wishing to enter or leave the Persian Gulf must pass through it. This holds true for both cargo ships and warships. What’s more, the deployment of additional warships in the region could increase the risk of escalation owing to the limited space for manoeuvre.

A blockade on this route would indeed have far-reaching consequences for global trade, as roughly 17 billion barrels of crude oil and a third of the world’s shipments of liquefied gas are transported through this crossroads every day. What’s more, one of the 10 largest container ports in the world is located in this region. Indeed, as a state-of-the-art port, Jebel Ali in the United Arab Emirates is hugely important to local trade and industry.

Hapag-Lloyd services are running as usual

The Middle East is an important market for Hapag-Lloyd, too. At present, 13 of its 118 liner services make calls in the region. And they have to sail through the strait every time they call at ports of destination in the Gulf.

To date, however, there have not been any negative impacts on the operations of our vessels. Detailed safety plans have been worked out in the event of a crisis, such as if a ship and its crew are detained. In addition, the crews on board Hapag-Lloyd ships have been specially trained for a wide range of dangerous situations. Nevertheless, if the safety situation worsens and safe passage becomes no longer possible, Hapag-Lloyd will adjust its routes accordingly. First, however, every effort should be made to resolve the crisis by diplomatic means and to ensure the safety and freedom of maritime traffic in the Strait of Hormuz. In any case, none of the ships that Hapag-Lloyd owns or charters call at ports in Iran.

Risk surcharge for the Gulf region

In recent weeks, tensions in the region have triggered a spike in transport costs – and not just for tankers. The reason behind this increase is the fact that ship insurers have adjusted their risk assessments. For example, the London-based insurance exchange Lloyd’s and the International Underwriting Association added Oman, the Gulf of Oman, the Persian Gulf and the United Arab Emirates to the list of areas in the Gulf region posing “enhanced risk for marine insurers”. As a result, companies operating there will have to pay so-called “additional premiums” on their insurance. After the incidents involving two tankers in June, these premiums rose sharply.

In response to the related increases in operating costs, Hapag-Lloyd has been levying a so-called vessel risk surcharge (VRS) since 15 July. The surcharge of USD 42 per TEU of cargo applies to transports traveling from, to and via the Persian Gulf and the Gulf of Oman. The VRS will also apply to transports traveling from China into the Gulf beginning on 1 August, and to transports sailing to or from the United States and/or Canada beginning on 5 August. Should the security situation change, more countries may be added to the list of countries subject to the VRS. In addition, VRS rate adjustments are also possible.
Source: Hapag Lloyd

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