Shipping firms shift to land routes as Hormuz disruption cuts Gulf trade volumes

Major shipping companies are increasingly shifting to overland transport routes as they seek alternatives to the Strait of Hormuz, the Financial Times reported, citing company executives.

Under the new arrangements, companies transport containers to ports in Oman and Saudi Arabia before distributing them across the region by truck.

“The only way to get cargo there, meaning to the Gulf states, is via overland routes… But the capacity of those routes is, of course, far more limited,” Rolf Habben Jansen, chief executive of German shipping company Hapag-Lloyd, said.

Vincent Clerc, chief executive of Maersk, one of the world’s largest shipping firms, also told the Financial Times that the use of alternative supply routes had increased.

“Both Saudi Arabia and Iraq have opened their borders to large numbers of trucks coming from Iraq, Jordan and even Türkiye,” Clerc said.

According to the Financial Times, major logistics companies including MSC, Maersk, CMA CGM and Hapag-Lloyd have redirected vessels to ports in the Gulf of Oman, including Fujairah, as well as to the Saudi Red Sea port of Yanbu.

Containers arriving at those ports are then transported by truck to Saudi Arabia’s Dammam Port, the Iraqi city of Basra and the UAE’s Jebel Ali Port.

Cargo is subsequently shipped from those logistics hubs to its final destinations.

A London-based ship broker, who was not identified by name, said grain traders had also begun using the system. “The volume of grain arriving in Fujairah and Khor Fakkan has increased. Those cargoes are then trucked to the UAE’s major ports before being distributed to Qatar, Bahrain and other Gulf countries by smaller vessels,” the broker said.

Company executives, however, said the alternative land routes could not fully replace the previous cargo flows that moved through the Strait of Hormuz.

Habben Jansen said trade volumes in the Gulf region had fallen by between 60% and 80%.

Freight rates have also risen because of the additional costs involved.

The Financial Times reported that container shipping rates between Shanghai and the Gulf and Red Sea routes had surged to record highs, exceeding even levels seen during the COVID-19 pandemic.

According to Clarksons Research data, the cost of transporting a 20-foot equivalent unit container rose to $4,131 from $980 before the conflict.

Iran said it had halted trade through the Strait of Hormuz following the military operation launched on Feb. 28 by the US and Israel.

Around 20% of global oil trade and more than 30% of liquefied natural gas trade passes through the strait.

Maersk announced on March 2 that it had suspended the acceptance and shipment of refrigerated cargo, dangerous goods and special cargoes bound for Gulf countries following the outbreak of conflict in the Middle East.

The Danish company exempted only the Saudi ports of Dammam and Al Jubail from the measure.