Reroute tankers, shipping costs rise

Commercial shipping companies are extending voyages and rewriting schedules as security risks in the Red Sea and Strait of Hormuz push more vessels onto longer routes. New industry guidance published this week urged shipowners and crews to adopt tighter precautions for Hormuz transits, while cargo owners and exporters said the disruption is already feeding through to freight bills, delivery timing and sales plans. The effects are spreading beyond oil tankers to food, medicine and agricultural exports. The U.N. Food and Agriculture Organization has warned that a serious disruption in Hormuz could lift food prices globally within six to 12 months, and a pharmaceutical industry report said some drug supplies are one transport shock away from shortage. ### Why are ships taking longer routes now? The Strait of Hormuz and the Red Sea sit on two of the world’s most important trade lanes, and ship operators are treating both as persistent risk areas rather than short-lived flashpoints. gCaptain reported on May 20 that updated industry guidance for Hormuz transits called for stricter voyage planning, closer coordination and heightened caution as threats mounted in and around the waterway. (gcaptain.com) Red Sea disruption has already pushed many vessels onto detours around southern Africa, and the added caution around Hormuz is compounding that strain. Global Trade Magazine said longer sailings are creating a “risk visibility gap” for shippers and importers, while shipping commentary cited in market coverage said route changes were lengthening voyages and complicating vessel rotations. (gcaptain.com) ### Where do the higher costs show up first? Kenyan shipping executives said the first impact is freight and insurance. The Kenya Times reported in March that charter fees had risen from about $100,000 to $400,000 in some cases, while insurance premiums had also climbed as carriers responded to Middle East tensions. Kenya Ships Agents Association Chief Executive Officer Elijah Mbaru said ships originally bound for the Middle East were diverting cargo to safer ports. (gcaptain.com) Kakuzi, the Kenyan agribusiness exporter, said on May 21 that Middle East instability and Red Sea shipping disruption were creating uncertainty for exporters targeting Europe. Chairman Nicholas Ng’ang’a said the company had accelerated diversification across products and export destinations as the global environment changed. ### Why is the U.N. warning about food prices? The U.N. (thekenyatimes.com) Food and Agriculture Organization said a severe Hormuz disruption would hit food systems through energy, fertilizer and freight rather than only through crude oil. Prism News, citing the FAO warning, reported that the agency sees the risk of a global food-price shock emerging within six to 12 months if disruption is prolonged. (thekenyatimes.com) Fertilizer is a key part of that chain. Prism reported that natural gas accounts for around 70% of nitrogen fertilizer production costs, meaning an energy shock can feed quickly into farm input prices and then into harvest costs and food markets. ### How exposed are medicine supplies? A PharmExec report published last month said drug supply chains face concentrated sourcing and transport chokepoints that leave even medicines not currently in shortage vulnerable to a new disruption. (prismnews.com) The report said findings were based on the U.S. Pharmacopeia’s vulnerable medicines list. A separate PharmExec report said the conflict had already cut global air-cargo capacity by 22% since the start of the fighting and raised concern about the movement of active ingredients and packaging components. (prismnews.com) That means the risk is not limited to finished medicines; it also extends to materials needed to manufacture and ship them. ### What should readers watch next? (pharmexec.com) Shipping advisories are likely to remain the clearest near-term signal. gCaptain reported this week that industry transit guidance for Hormuz had been tightened, and exporters such as Kakuzi are already disclosing the commercial effects in current earnings updates. The next evidence will come from freight rates, insurer pricing and company statements on delayed cargoes and rerouted sailings in the weeks ahead. (gcaptain.com) (pharmexec.com)