Loadstar Leader: Trump Hormuz toll plan catastrophic for box shipping

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It has often been observed since the end of February that the US and Israeli strikes on Iran have been counterproductive at best – the rebuilt Iranian regime seems stronger than ever – its nuclear programme freed from the shackles of agreements and international observers – and then there’s Hormuz, open to all navigation before the conflict, and now… very much not.

Safe to say that things haven’t really gone as planned, if indeed there was any planning in the first place, and the latest twist is the US Navy, according to Trump, will reinstate its “blockade” of Iranian shipping at 8pm this evening, following it up with this statement posted on social media:

“The USA will be, from this point forward, known as ‘THE GUARDIAN OF THE HORMUZ STRAIT’, but as such, and as a matter of FAIRNESS, will be reimbursed at the rate of 20% on all cargo shipped, for any and all costs necessary to do the job of providing safety and security to this very volatile section of the World. The process and formation will begin immediately.”

Really? It is, when you do a few preliminary calculations, an astonishingly high charge, especially compared with the $2m transit fee Iran proposed in recent weeks.

According to maritime media that focus on the wet bulk and crude oil trades, that would mean the US charging a tanker $33m for a single transit, based on today’s prices.

For container lines and their customers, it could be catastrophic – let’s say the average value of the cargo in a container is $50,000 (the global average is actually slightly higher, at just under $55,000), that would incur a fee of $10,000 per box. Or $20m for a vessel with 2,000 containers to discharge at say, Jebel Ali.

Yep, we have a lot of questions as well:

First, is the US Navy seriously going to examine every separate bill of lading on a vessel? And if it does, will the transit fee be applied to individual cargo owners, or the ship operator, which then has to recover the monies from its customers?

Second, misdeclared cargo has long been a problem for shipping lines, largely due to dangerous goods and weight issues, but this is almost certain to introduce a new layer of misdeclarations on the value of cargo.

Third, assuming questions one and two are overcome, perhaps through some AI applications, the 20% is mostly likely to simply reinforce the landbridge options that have emerged after the first closure of Hormuz. The latest SCFI reading of its Shanghai-Dubai leg was $4,200 per teu, meaning the overall freight cost of shipping one container to Dubai with the US transit fee on top is beginning to near $15,000, which is around double the cost of shipping to a Gulf bypass port and trucking to the UAE, Qatar, Bahrain, and so on.

Fourth, what about boxes on a ship calling at Dubai that have an entirely different destination – will they also be subject to that fee, and will they also be subject to a second time when the vessel exits Hormuz?

Ports are already voting with their feet: The Financial Times today reports that DP World is looking to develop a new container terminal in the Fujairah emirate, located outside Hormuz, which it believes could be up and running within 18 months, specifically for the purpose of routing cargo into the Gulf without traversing the strait.

That sort of timeline suggests the infrastructure is already in place and the main job is to equip it – assuming a project cost of $500m (a generous overestimate), that would be the equivalent of just 25 transits by box ships carrying 2,000 containers with a value of $50,000 in them each…

Remember, freight is like water, and in that respect the economics of “The Guardian of Hormuz” don’t stack up either – all it will really do is create new, although inferior, supply chains.

The Loadstar suspects that the Trump administration hasn’t properly thought this through, and if we’re talking about matters of fairness, suggests the while thing should be quietly shelved…