Global Shipping Returns to Normal After Iran War
· news
A Fleeting Crisis: The Resilience of Global Shipping
The war in Iran sent shockwaves through the global shipping industry, but as the dust settles, it’s clear that the conflict will leave little lasting impact. Despite attacks on vessels and lengthy delays, analysts say shipping firms are likely to emerge from this crisis relatively unchanged.
Shipping facilitates about 90 percent of global trade, making it an essential component of international commerce. As Punit Oza, head of consultancy Maritime NXT, notes, “Ships do not sail because shipowners want them to; they sail because consumers somewhere want grain, iron ore, gas, or televisions.” The industry is driven by demand, and as such, it’s likely to continue much as before over the long term.
The resilience of global shipping is nothing new. In 2020, container shipping volumes fell by just 1.2 percent compared with the previous year, despite the COVID-19 pandemic wreaking havoc on global trade. By January 2021, cargo volumes at ports worldwide had surpassed pre-pandemic levels, rising 6.4 percent year-on-year.
The Iran war and subsequent Houthi attacks in the Red Sea scrambled regional supply chains, but shipping companies have been rapidly adding capacity since Washington and Tehran signed their memorandum of understanding on ending the conflict. Capacity between Asia and the United States’ West Coast has already rebounded to pre-war levels on some routes, with container shipping firms redirecting vessels along longer alternative routes to avoid conflict in the region.
Shipping companies are diversifying their supply chains by exploring alternative routes and hubs. As Judah Levine, head of research at freight booking company Freightos, notes, “Containers find a way.” This includes smaller ports like Fujairah and Khor Fakkan in the UAE and Dubai’s Port of Jebel Ali.
The International Maritime Organization has listed the protection of shipping lanes as one of its top agenda items for discussion at its biannual meeting. Greater international cooperation could lead to more effective measures to protect shipping from future crises, but it remains to be seen whether this will happen.
In the end, it seems that the war in Iran has served only to reinforce the fundamental characteristics of the global shipping industry. Its resilience in the face of crisis is a testament to its essential role in international trade. As Oza notes, “Even the most severe conflict cannot change the physics or economics” of seaborne trade. It’s a sobering reminder that despite the upheaval caused by war and other crises, the underlying drivers of global commerce will always endure.
As shipping companies begin to rebuild and redirect their vessels, it’s worth keeping in mind the long-term implications of this crisis. Will greater international cooperation on maritime security lead to more effective measures to protect shipping from future crises? Can shipping firms truly diversify their supply chains and mitigate risks associated with regional conflicts? These questions will only be answered over time.
Reader Views
- CMColumnist M. Reid · opinion columnist
The Iran war may have caused short-term chaos in global shipping, but let's not forget that even during the pandemic, container shipping volumes rebounded faster than expected. This shows the industry's remarkable resilience, driven by demand from consumers who won't stop buying grain and televisions just because of a conflict halfway around the world. But what about the environmental cost of this resilience? Shipping companies are diversifying their supply chains to avoid conflict zones, but they're also exacerbating congestion at smaller ports like Fujairah, which raises concerns about air pollution and port capacity in regions with lax regulations.
- CSCorrespondent S. Tan · field correspondent
While shipping firms have indeed shown remarkable resilience in bouncing back from the Iran war, I still think we're glossing over a crucial aspect: the financial toll on small operators and cargo owners who can't absorb these kinds of disruptions. In the rush to get trade flowing again, we should be cautious not to overlook the hidden costs that will likely fall on the shoulders of smaller players in this industry. It's one thing to say "containers find a way," but another to consider whether those ways come at an unsustainable price for some companies and consumers.
- RJReporter J. Avery · staff reporter
While the resiliency of global shipping is certainly commendable, let's not forget that this "return to normal" comes at a significant cost: higher prices for consumers and reduced profitability for smaller carriers who can't compete with the majors' capacity additions. The industry's ability to adapt and redirect vessels may have minimized immediate disruptions, but it also means that many of these changes will be locked in place long after the conflict is forgotten, perpetuating a status quo that benefits only the largest players in the market.