00:01This is Apropos.
00:03NATO Chief Mark Ruta says the military alliance is discussing the best way to reopen the strategic Strait of Hormuz
00:10through which a large chunk of the world's oil supplies normally pass.
00:14But with the Gulf region handling over 26 million containers each year,
00:18the consequences of the current crisis extend well beyond energy.
00:23Analysts warn that prolonged disruption will have a direct impact on food production costs right around the world.
00:29Eliza Herbert has more.
00:33Some 120 vessels usually transit through the Strait of Hormuz daily.
00:38But as the passage has become perilous, effectively blockaded by Iranian strikes,
00:44traffic has dropped by 97% since before the war.
00:48An estimated 3,200 vessels remain stranded in the Gulf.
00:53The international maritime community is concerned for their cruise.
00:58We've got hundreds of ships with 20,000 seafarers.
01:04That's the number that's being talked about, but actually that's a conservative number.
01:09It's probably going to be more than that.
01:11The vessels can't leave.
01:13They are actually trapped.
01:14Another stalwart of the seas at risk of becoming collateral damage is the container.
01:20Some shipping groups have suspended bookings and are reserving the right to dump containers at nearby ports under a 19th
01:28century rule,
01:29costing their clients thousands of dollars in extra fees and risking stranded cargo, blocked terminals and further delays.
01:39Others are rerouting.
01:41But while only 5% of global goods travel through the Strait, redirecting trade is complicated.
01:48Renewed fears of Houthi attacks in the Red Sea are threatening the Suez Canal,
01:53and remaining options between Europe and Asia require longer routes and therefore more fuel and higher charges.
02:01Within the Middle East, lorries are an alternative to move containers across land.
02:06But distances and border controls pose extra challenges and costs,
02:11especially for fresh produce companies often already plagued by thin profit margins.
02:17Businesses are describing the situation as chaos,
02:20with ripple effects likely to be felt by the consumer.
02:25Well, to discuss all of this, we're joined now by iBrew Siruku Balju,
02:30Assistant Professor in Circular Supply Chains at the School of Management at the University of Bradford.
02:36Thanks so much for being with us on the programme.
02:38As we saw there in that report, iBrew Shipping customers say the conflict has seen carriers adding thousands of euros
02:45in extra charges,
02:47dumping containers essentially wherever they can, often very far away from where they're supposed to be.
02:52What impact at this stage is all of this having on businesses?
02:58Yeah, thanks, first of all. Thanks for having me.
03:01So, first of all, this would have a couple of impact on the industry and the consumer prices.
03:09So, I want to clarify one thing first.
03:12So, when a war declared or a transit point is closed, under the standard legal framework governing the global shipping,
03:23the choice where the cargos would be left, the choice effectively belongs to the carrier.
03:29So, the customers in that case have very little choice.
03:34And we are also aware that because of this reason, the shippers and freight forwarders are also exposed to extra
03:41fees charged by the shipping companies
03:43because of their rerouting changes in discharge ports and increased bunker prices.
03:49And the freight also increased, freight rates are also increased because of a couple of reasons.
03:58First of all, the more risk insurance has increased quite a lot.
04:02So, before the war, it was around like 0.15 to 0.25 percentage.
04:09But as of March 11, it jumped to up to 10 percent, especially if the ships have ties to UK
04:17or US or Israel.
04:19And in addition to that, the emergency bunker surcharges also increased and implemented.
04:27And conflict has caused a massive spike in the banker's fuel prices.
04:33Like major hubs in Singapore, fuel prices have jumped like up to 30 to 40 percent.
04:40And in addition to that, big companies like Maersk, MSC, CMA, CGM, they have implemented higher bunker surcharges.
04:51And the charge was actually ranging from $150 to $180 per TU for long haul rates.
05:01And obviously, this might not have a direct impact on the consumer prices for products,
05:08but they will eventually be felt by the consumers.
05:12Yeah, and shipping groups, they're warning that they reserve the right to do all of this by invoking a 19th
05:18century rule
05:19that allows them to leave containers at the nearest available port.
05:22But what exactly is this rule?
05:24And is this the first time it's ever been applied?
05:31Those rules are based on the law that they have developed.
05:36And unfortunately, as consumers, as the cargo owners, they have to obey follow the rules,
05:44because when the bill of lading, which shows the ownership of the products,
05:51in that special document, there are like some special war clauses.
05:57And when a shipper agrees to send their products,
06:01they basically agree to follow the rules if war occurs.
06:05So they actually, the shippers also actually signed this agreement
06:10when they are finalizing their shipment arrangements.
06:14And are certain industries here particularly affected at this stage by the disruption?
06:19We think initially perhaps of food and food costs,
06:22but what are the sectors that are going to be hardest hit by all of this?
06:28So, yes, everyone right now knows that the energy prices is going to increase,
06:35like the Brent oil prices increased to like $111 as of today.
06:43But the food industry, like the fresh food and the halal meat industry,
06:49it's also affected heavily, because when we look at the region,
06:54like the Qatar and the United Arab Emirates,
06:56they are heavily dependent on the imported food products,
07:01like 82% of their foods coming from abroad.
07:05For the, especially the fresh fruits and the chilled meat products,
07:09when we look at these type of products,
07:11they have a total shelf life up to like 24 to 28 days.
07:15And because there are like existing delays and because of the rerouting delays,
07:21which could be up to like 10 to 14 days,
07:24and because of the port congestion delays, which could be up to 11 days,
07:29the products become often spoiled and becomes like unsellable
07:33by the time they reach the retailer's shelf.
07:36And right now, what we are observing in the region is that the rejection rates
07:41at the destination points are increased up to 65%
07:45because basically products do not meet the minimum remaining shelf life requirement
07:50for the Gulf supermarkets.
07:52For the halal meat production,
07:55again, the Gulf region heavily depends on the important labor animals
07:59and also important feed products like corn and soy.
08:04And what we observe in the farmers in the Middle Eastern portly and livestock,
08:10they keep a stock for 14 to 21 days for their feed supply.
08:15And when the strait is closed, this fish shipment is totally stopped.
08:20And reports indicating that the poultry producers in the region
08:26have begun prematurely culling their flocks
08:29because they cannot afford to feed them.
08:32Another problem which is crucial is the synthetic fertilizers, fertilizers.
08:41So before the crisis, probably many people were not aware of that,
08:45but the strait of Hormuz was also mainly used for the global fertilizer trade.
08:53Specifically, more than 30% of the URA was mostly used for nitrogen fertilizers
08:59produced from the natural gas and it's exported from the Gulf countries.
09:04So, and we know that the food production is highly dependent on the synthetic fertilizers
09:11and which is mainly basically provided by this region.
09:15So, and right now, what we are hearing from the farmers from Brazil, for example,
09:22who are planting sugar and manufacturing sugar,
09:26they will probably reduce their production because of the,
09:32they are highly dependent on the synthetic fertilizers coming from the Gulf region.
09:37And this will eventually impact on the price of the sugar and the relevant products as well.
09:42And Ebru, this crisis, it's really highlighted, hasn't it?
09:46The fact that global trade depends on really a surprisingly small number of narrow waterways.
09:52Talk to us a little about where the others are
09:54and are they also vulnerable to this kind of geopolitical shock?
09:59Yeah, when we look at, there are like some major maritime shock points
10:06and we can think about number of different maritime shock points
10:14and we can like classify them, five of them.
10:18One of them was this one, the one we are currently talking about,
10:24the Strait of Hormuz, and the other one was,
10:27which were also quite known, was the Suez Canal.
10:31And we mainly know of the Suez Canal from the Houthi attacks.
10:36And in the last two years, what we observed that during those Houthi attacks,
10:43the big maritime companies were not able to use the Suez Canal
10:50and they had to ship their products from the Cape of Good Hope.
10:55And this included like additional 10 to 14 days to the shipment dates.
11:03In addition to that, similar to Suez Canal,
11:08we also have Panama Canal as one of the critical maritime shock points.
11:13And this was also a key route.
11:15And the Panama Canal at this point might not be really in a danger
11:23for like a political problem,
11:25but the major problem would be there potentially a climate-related problem
11:30because the issue, the water level,
11:35because in the last couple of years,
11:37there was a severe drought in the region,
11:40which reduced because of this drought,
11:43the passage of the ships was reduced significantly.
11:49And another maritime shock points was the Turkish Bosporos and Dardanelles,
11:57which are controlled by the Turkish authorities.
12:03At this point, there is no like another political problem going on there.
12:07But during the Russia's invasion of Ukraine,
12:13Turkish authorities decided to ban the sailings of the warships from that region.
12:22So when we look at the maritime shock points,
12:25we could also think about those as well.
12:27Ebru, we'll have to leave it there for now.
12:28Thanks so much for being with us, though, on the programme.
12:30That's Ebru Siruku Balju,
12:32Assistant Professor in Circular Supply Chains at the University of Bradford.
12:36Thanks so much.
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