'No light at the end of tunnel' to open Strait of Hormuz for now: Shipping executive

[00:00:00]We see multiple changes in the marketplace going on at the moment. So, I think if we just focus on the Middle East for a second, the first part is um from a practical perspective, the Strait of Hormuz for container shipping remains closed. Um vessel trapped is still over a hundred ships sitting inside the upper Gulf that are unable so far to evacuate and get out of the upper Gulf.

[00:00:22]We have a land bridge supply chain which has been set up, but currently that's only able to transport around a third of the goods that would normally move in and out of the UAE of the GCC area in the upper Gulf. And that means that all of the cargo that needs to go in cannot go in and get into Jebel Ali. Uh and if you think about Jebel Ali, it's 15 to 16 million TEUs of capacity versus Khor Fakkan with 5 million on the on the UAE coast. So, what we see at the moment is cargo is coming into the ports on the Gulf of Oman, ports in the upper Red Sea, and then making land bridge connections to get across into the upper Gulf. Uh when it gets there, it's either moving via truck or even some of the ships that are trapped in the upper Gulf are actually used being used at the moment as feeder services to move cargo around inside the upper Gulf to try to maintain that supply chain.

[00:01:15]We're very much prioritizing foods and medicines like we have done uh throughout the length and and breadth of this crisis, but for all the time being, we don't see any uh light at the end of the tunnel where there's going to be a short-term fix to getting Hormuz open. And what we see on the ground is a bit different than than what we see necessarily always uh in the press.

[00:01:35]But Kuehne + Nagel obviously is trying to do everything it can to try and make sure that there are these alternate ways to get some of these key shipments out.

[00:01:42]I am curious as to what kind of cost pressures this is placing not just on the sea logistics side of Kuehne + Nagel, but that of the freight forwarding side as well. What kind of cost and what kind of delay in terms of either monetary cost or logistics cost and and then and and lengthened the delivery times might be impact How is it impacting these two parts of the business?

[00:02:03]Yeah. So, delivery costs have absolutely gone up. So, the cost for sea freight going into the area have risen uh substantially, and we see also really quite substantial delays and difficulties to get cargo from Jeddah and King Abdullah Port on the Red Sea across into the upper Gulf. And the same thing from Fujairah and uh and Khor Fakkan coming into the upper Gulf as well. Delays can extend to 9, 10, 15 days to get cargo across from the Red Sea into the Gulf.

[00:02:35]And 4, 5, 6, 7 days to get cargo across from uh the the Gulf of Oman into the upper Gulf as well. And this is because the land bridge solution simply is not going to be able to keep up with the capacity that's lost by not being able to get into Jebel Ali in the upper Gulf.

[00:02:53]Yeah. Michael, uh forgive me, but I have to ask you for your thoughts on something that one of our guests earlier this week actually mentioned. Farrokh Farrokh F. mentioned that when it comes to the tolls because Iran is only proposing to put a toll of $1 on each barrel of oil.

[00:03:07]This is something that a lot of shippers might be actually willing to to to accept. And thus that this that the opening or the reopening of the Strait of Hormuz should be facilitated because the toll isn't that big of an issue for many shippers. I am curious because again, uh given the fact that Kuehne + Nagel deals in this space, is this indeed the case?

[00:03:24]Is there perhaps uh uh an acceptance that perhaps a $1 toll on each barrel of oil passing through the Strait of Hormuz is something that can be accepted or tolerated? What are What is the stance of shippers like Kuehne + Nagel and for some of your peers in the space with regards to that?

[00:03:39]Yeah, look, I mean, I think you have two different topics. I think you've got a cost topic and you've got a uh an acceptance of a toll being imposed by a sovereign nation on international trade and facilitation of trade. You know, one of the challenges that in our industry is we want to see a continued freedom of navigation being one of the main priorities of our industry. So, >> [snorts] >> there's a cost topic which I think the industry would be okay to have an additional cost from getting that through a certain waterway, but we absolutely don't want to pay a toll, right? And that won't be acceptable to the industry to see a toll in place. You see more than that cost being paid by the industry today in terms of land bridge solutions and moving cargo through. So, that's not actually what the issue is. The issue is there's not going to be broad acceptance of a toll being paid to a sovereign state to go through international waterways. And there is some optimism out there that we could see a peace deal or some kind of extension of a ceasefire. And what difference does that make for your business whether we actually see it through or just get another extension of a ceasefire?

[00:04:44]Because in a de-escalation scenario, I wonder how quickly can you scale back up in the region? And what are the remaining risks that you need to think about?

[00:04:56]>> Mhm.

[00:04:57]So, scaling back up I think is not going to take a long amount of time. Mhm. Uh cargo that's currently being deposited on the Gulf of Oman can quickly transit and be deposited in the upper Gulf and relieve the pressure that's on the supply chain there at the moment.

[00:05:13]>> Mhm. Cargo that's coming through the Red Sea, different story because there's still the restrictions on transiting Bab al-Mandab Strait because of the risk associated with the Houthi rebels. And that has been closed for almost a couple of years.

[00:05:24]Costs should be coming down very quickly once we see the Hormuz Strait reopening to main main vessel transit coming through. And and I think the the industry is ready and prepared to act very quickly as soon as that's opening up and we'll see a once we see a cessation of hostilities.