Transcription
Cargo ships traveling from China to the Gulf are taking triple the usual time to arrive. That's what a shipping analyst tells CNN.
Many vessels are now rerouting to Jeddah in Saudi Arabia, instead of passing through the Strait of Hormuz to Dubai. And they're taking the long way to avoid the threats of potential militant attacks. The analyst says the ships are sailing across the Indian Ocean and around the southern tip of Africa, up through the Mediterranean Sea and then down through the Suez Canal into the Red Sea. From the top.
Now, not only does that take about 60 days compared to the previous 20. It's almost four times more expensive. CNN Business Senior reporter Hannah Zaidi joins us live now from London. So the data suggesting here that several ships have passed through the Strait of Hormuz in just the past day. What can you tell us about that? How many we know are actually getting through?
Well, Cristina, data from MarineTraffic, which is a ship and maritime intelligence provider, saying that at least three vessels and a cargo ship appear to have passed through the strait in the past 24 hours. But let's be clear, that's a trickle compared to the number of ships that we're moving through before the war. The International Maritime Organization said last week that nearly 2,000 vessels are trapped in the Persian Gulf, so adjacent to the strait. And as you laid out in such detail, the companies are coming up with all kinds of ways to try to avoid the strait, going all the way round the southern tip of Africa, even trying to avoid part of the Red Sea as well. And so we're getting these kind of very circuitous routes, adding huge costs to shipping. And it's unclear whether that will really be enough to move the amount of goods that need to be moved. We're seeing trucks lining up at the Saudi Arabian port of Jeddah. And we also know that Saudi Aramco, Saudi Arabia's big oil exporter, is now exporting some of its oil from the UN report, also on the Red Sea. But I think it must be pointed out that the big issue is this choking off of the Strait of Hormuz. And several analysts, experts at the International Energy, has said that until we get vessels sustainably and safely and consistently moving through the strait, we are going to keep seeing oil prices at the levels we've been seeing and concerns about supply of oil, of natural gas, of fertilizers, of all sorts of goods. Kristina.
Yeah. And in the meantime, Tehran are saying they will quote, "absolutely keep charging a fee for safe passage through the Strait of Hormuz." That's according to an Iranian official. I just want to show our viewers what that official said in an interview with Indian TV. Let's take a listen to what Iran is doing is just to make sure that the vessels belonging or related to the United States and Israel and other countries that are in any manner are participating or helping the aggressors make any harm to Iran's national security. And I think that's that's based on international law. Again, I have to clarify that other states that has nothing to do with this act of aggression against Iran can pass through the Strait of Hormuz after necessary coordination with Iranian authorities.
So if Iran continued charging for passage through the Strait of Hormuz, what impact is that going to have on shipping and also on global inflation?
It certainly won't help matters. As you mentioned in your introduction, shipping costs have surged, as shippers try to avoid the strait and take much longer routes, which mean higher fuel costs, more time to get goods from point A to B, and also a more risk that you could snarl supply chains in ports far away from the Middle East. And we've seen this happen, in previous with previous shocks to global supply chains where you have containers piling up, in India, or because goods are not moving through supply chains at the speed that they need to. And all of that adds cost to to shipping again. The most important thing certainly for oil prices and therefore inflation, because this is really an energy price shock, is to get that Strait of Hormuz open. Once again, oil prices have come off a bit in the last few days as we've seen some optimism around potential talks between Tehran and Washington. But worth mentioning and worth pointing out that they are still much higher than they were before the Iran war started on February 28th. So we had Brent Crude hovering around $70 a barrel before the war started. At the beginning of the year, before tensions between Iran and the US started ratcheting up, oil was sitting. Brent Crude oil was sitting at $60 a barrel. So I think all of this just goes to show that there may be some alternatives to the Strait of Hormuz, but certainly charging vessels to to go through it will only add costs to shipping. And I'm not sure that it will give the shipping companies and their insurers also very important in this whole equation, the confidence to return in full to to transiting through the strait.
All right. Joining us live now is the director for the Middle East program at Defense Priorities, Rosemary Kalanick. She is also author of the book Black Gold and Black Male Oil and Great Power Politics. So this idea that global shipping could reroute all the way around South Africa instead of passing through parts of the Middle East. I mean, how sustained is that? Obviously that is a much longer route, far more expensive. Is that really sustainable? In the long term?
It is sustainable. If you're talking about avoiding the Red Sea, it doesn't solve the problem necessarily. But we did see the market adapt in that manner. When the Houthis were targeting Red Sea shipping and the year that that happened, 2024, profits for maritime shipping actually went up. They actually made more money on the route because it doesn't add that much in terms of insurance and fuel costs compared to the values of cargo that they're transporting. So that is sustainable. And so you mentioned that obviously doesn't solve the Strait of Hormuz issue. So that still remains a key issue. And if you have a situation where, yes, if, you know, the Red Sea isn't being used, instead the Cape of Good Hope is being used, but still at the same time, given that 20% of the world's oil supply comes through the tradeable moves, that still will cause oil prices to remain elevated for the time being.
That's right. It will. Although we have seen some adaptation already. So Saudi Arabia is now rerouting about 5 million barrels a day, additional, from Hormuz to the Red Sea. So if that continues, you go from losing, you know, 20 million barrels a day to the Hormuz, to down to 15 million barrels a day. We've also seen some tankers pass through Hormuz if they've paid what appears to be a toll to Iran for doing so. We're also seeing Iranian tankers and Chinese tankers making their way through a much lower rate than before this crisis started. So we've seen some adaptation, but likely prices are going to remain high until this, this conflict is solved.
And so what does this say about just the fragility of depending on one or two major chokepoints to get the bulk of the world's oil supply to where it needs to go?
Yeah. I mean, it is an issue, and it's an issue that is partially geography and partially the market. So on the one hand, the cheapest way to to send oil prices is overseas, like, you know, for shipping. Sending it through Hormuz made a lot of sense for many years because Iran did not close the strait. And the United States, of course, also promised to keep oil flowing to the Persian Gulf using US military power. Hoping mostly that that would deter Iran from trying to close the strait. Now we know it's sort of backfired because we started this war that led to the state, the Straits closure. So if companies understand now, going forward that the Strait is much less secure than it was in the past, you might see more attempts to find alternative routes, pipelines that go to the Red Sea, pipelines that go to the Mediterranean. You could even imagine building rail lines and other means of transporting oil. So that could happen in subsequent years. But it takes a long lead time to build those those infrastructure.
Just in terms of, you know, obviously, we've had mixed messages coming out of the White House about whether or not we could see some kind of exit ramp, what the status of negotiations is at this point in time. If this war does continue to drag on for, let's say, several months at this point, which countries really do stand to suffer, especially in Asia? We know that China is somewhat shielded, well prepared for this. But other countries in Asia beyond China stand to lose significantly.
Yeah. So the countries that are going to hurt the most from this are the ones that have the most oil-intensive economies, the ones that, you know, consume the most oil to produce their GDP. China and Japan are both less oil-intensive than the United States. Europe is also less oil-intensive, but developing countries in Asia, India, for instance, but also, you know, smaller countries like Thailand, Indonesia, etc. You know, they're more oil-intensive and they could be hurt more from this. In general, developing countries will be hurt more from this than, than, you know, Western countries that depend less on oil.
Right, right. Rosemary Kalanick, thank you so much for joining us. We appreciate it.