Strait of Hormuz Closed, Shipping Costs to the World Threatened to Rise
JAKARTA - The Iran war has begun to disrupt the world's ship fuel supply. Citing a Kyodo News report, Friday, May 15, the closure of the Strait of Hormuz has stalled the supply of bunker fuel, especially to Asia.
Bunker fuel is a thick, heavy, and dirtier fuel for ships than vehicle or aircraft fuel. It comes from the lowest part of the oil processing process. But it is this fuel that drives the world's large cargo ships.
Around 80 percent of global trade goods are shipped by sea. Therefore, disruptions in bunker fuel supplies can quickly spread. Ships slow down. Shipping costs rise. Commodity prices are also under pressure.
The first impact is felt in Asia, a region that is highly dependent on Middle Eastern oil. Singapore is an important point because it is the world's largest ship refueling center.
For now, Singapore's supply is still holding up. But reserves are starting to run low and prices continue to rise.
Before the war, the price of bunker fuel in Singapore was around 500 US dollars per metric ton. In early May, the price had already reached 800 US dollars.
"We just see prices in Singapore continue to rise, rise, and rise," Natalia Katona of OilPrice said, quoted by Kyodo.
Shipping companies are now starting to economize. Ship speed is reduced. Schedules are overhauled. Some shipping can be delayed. In simple terms: the ship is made slower so that fuel does not run out quickly.
Clarksons Research noted that the average speed of the world's bulk carriers and container ships has dropped by about 2 percent since the war began on February 28.
The cost burden is not small. The European Federation for Transport and the Environment estimates that the Iran war is making the global shipping industry bear a daily cost of 340 million euros, or almost 400 million US dollars.
For now, shipping companies are still bearing some of the burden. However, June Goh, an analyst at Sparta Commodities, warned that the cost could soon be passed on to customers.
The impact can be felt in many countries, including Indonesia. Many industrial raw materials, electronic components, food, and consumer goods enter through the sea route. If global shipping costs rise, import costs are also pushed up. The end could be the price of goods in the market.
Oliver Miloschewsky of Aon said that the shortage of bunker fuel usually enters the shipping cost faster than other cost pressures. The impact per item may be small. However, if it occurs in many sectors, the effect can spread to the supply chain and consumer prices.
In Singapore, the pressure is already visible. Ferry fares are going up. Cruise ships are adding fuel costs. Those who sail for vacation alone count, especially cargo ships that live from efficiency.
The shipping industry is now eyeing alternative fuels, including LNG or liquefied natural gas. Caravel Group said about a third of the ships it is building will be able to use two types of fuel: conventional and alternative bunkers.
Caravel Group CEO Angad Banga told The Associated Press, as quoted by Kyodo News, the ship owner is willing to pay more for a ship that can switch fuels. In uncertain situations, fuel choices have real economic value.
However, this way out is not smooth. LNG-fueled ships are more than 890 units in the world. The problem is, the supporting infrastructure is not even. The technology is there, but the scale is not enough.
The shipping industry's options are now limited. They have to deal with rising fuel prices, reduce ship speeds, or start looking at alternative fuels whose infrastructure is not evenly distributed.
By Bob Tan - Own work, CC BY-SA 4.0, https://commons.wikimedia.org/w/index.php?curid=156965555