Is the "Safe Passage" through the Strait of Hormuz coming? Middle Eastern shipping remains full of uncertainties, and COSCO Shipping is breaking the deadlock with multimodal transportation.

Ask AI · Why is vessel traffic still sluggish even after the opening of a safety corridor?

China Business Journal reporter: Ye Xiaodan Zhang Yun China Business Journal editor: Wei Wenyu

Since the outbreak of the conflict between the US and Iran, the “lifeline” for global energy shipping—the Strait of Hormuz—has once been thrown into “functional paralysis,” with a sharp crash in the number of vessels transiting. Data from market service agencies show that since March this year, the number of times merchant ships have passed through the Strait of Hormuz has fallen by 95% compared with before the conflict.

Just as the outside world thought the strait would be shut down completely, a new development has emerged: according to recent AIS data, multiple vessels have successfully traversed the Strait of Hormuz via a “tacitly approved” safety route.

However, according to the AIS data of the vessels, as of the morning of March 27 Beijing time, two container ships under COSCO Shipping Ports’ container unit—“CSAV North Arctic” and “CSAV India Ocean”—that approached the Strait of Hormuz have currently turned back toward the Persian Gulf and have not yet passed through the Strait of Hormuz.

Earlier, on March 25, COSCO Shipping Ports announced that it had resumed new bookings for some countries in the Far East to the Middle East region. Specifically, COSCO Shipping Ports resumed new booking services for standard container shipments from the Far East to the UAE, Saudi Arabia, Bahrain, Qatar, Kuwait, Iraq, and Oman through intermodal transport and transshipment.

On March 26, an executive of a listed company told a reporter from the China Business Journal (hereinafter referred to as “China Business Journal reporter”) that after the resumption of new booking services to some Middle East countries, the company was contacting customers to switch shipping carriers. In addition, some international freight forwarders in Yiwu are still waiting for updates from Middle East customers.

Reconstructing the route: avoid the strait through intermodal transport

In its fourth week after entering the conflict between the US and Iran, COSCO Shipping Ports has cautiously returned to the Strait of Hormuz.

On the evening of March 25, COSCO Shipping Ports released an update service notice for the situation in the Middle East, clearly stating that the restored booking transport route is not direct transiting through the Strait of Hormuz, but rather cargo delivery via a bonded land bridge plus feeder sea shipping. However, the specific transport方案 depends on the situation in the Middle East and the availability of space, and also on the company’s final decision.

Image source: COSCO Shipping Ports official website

A China Business Journal reporter noted that what is being called a “resumed booking” is in fact a form of route reconstruction, different from traditional transport modes. Shipping companies are seeking a balance between “restoring service” and “controlling risk,” adjusting the end point of trunk routes to ports on the east coast of the UAE outside the strait, and using intermodal transport to complete the last leg inside the Persian Gulf.

In terms of COSCO Shipping Ports, the company said it plans to transport cargoes from upstream Gulf countries via Khorfakkan or Fujairah through a bonded land bridge to Abu Dhabi CSP, connecting with its own feeder network with Abu Dhabi CSP as a hub, and transshipping onward to Saudi Arabia, Qatar, Bahrain, Kuwait, and Iraq, as well as to other areas in the UAE besides Abu Dhabi and Jebel Ali. In addition, Oman-bound cargo will be transshipped from India’s Mumbai New Port to Sohar in Oman.

On March 26, an executive of a listed company that has laid out its presence in the Middle East market told the China Business Journal reporter that after seeing COSCO Shipping Ports resume new booking services for some Middle East countries, the executive had already been contacting the company’s customers. “Many customers used to go through Maersk, and we are persuading customers to switch to COSCO Shipping Ports.”

A senior person surnamed Li Yang (a pseudonym), who engages in international freight forwarding in Yiwu, said that in normal years, after Ramadan ends, Middle East customers would come to Yiwu to purchase. Once purchase orders are confirmed, production cycles are around 20 days, and by mid-April they enter the shipping peak period.

“However, based on the current situation, demand in the Middle East market is basically being pushed back.” Li Yang analyzed that since it is unclear how the US-Iran conflict will develop and many Middle East customers have not yet clarified their purchase plans—because round-trip flights have not yet fully resumed—Middle East customers find it difficult to come to Yiwu for on-site purchasing.

Therefore, even though COSCO Shipping Ports issued an announcement about resuming new booking services for parts of the Middle East, Li Yang found that Middle East customers’ orders for bookings are not many. “We still need to wait for them to come back to China and lock in the cargo before shipping, so (the booking) demand isn’t large.”

A merchant at Yiwu International Trade City also told the China Business Journal reporter that some customers are indeed booking capacity with COSCO Shipping Ports, but customers far away in the Middle East still have no reply.

Liner companies using similar adjustment strategies have already taken action, and currently the focus is mainly on “cargo received, waiting to depart.” At the same time, quite a number of shipowners that are waiting and watching are also in that category. On March 25, Yang Ming Shipping issued an operational adjustment notice for the Middle East. For GS2 route vessels that were originally scheduled to call or discharge in India, they now plan to deviate from the originally planned route and stand by in nearby waters in the Middle East.

Yang Ming Shipping further said that given that multiple ship-attacks have occurred in the Middle East recently and the security situation continues to deteriorate, there is a serious risk to ships, crews, and cargoes transiting through the Strait of Hormuz and surrounding regions. Given factors such as conflict risk, the originally planned voyages or discharge arrangements are very likely to lead to risks such as cargo loss, damage, and personnel casualties.

In view of this, Yang Ming Shipping decided to temporarily defer port calls and unloading operations in India, while closely monitoring the security conditions at ports across the Middle East. Once the situation improves and meets safety standards, the vessels will immediately proceed to eligible Middle East ports to call and unload.

With the safety corridor open: vessel transits still few

According to a report by Xinhua News Agency on March 24, since the outbreak of the US-Iran conflict, the Strait of Hormuz—“the lifeline” for global energy transport—has been severely disrupted. Data from market service agencies show that in March, the number of times merchant ships have passed through the Strait of Hormuz fell by 95% compared with before the conflict.

Data source: Fanwei, ShipVision, Clarkson

ShipVision, a platform under COSCO Shipping Ke, shows that from March 1 to March 25, cargo ships transiting the Strait of Hormuz completed only 153 crossings; most sailed eastward out of the strait. Currently, the total number of vessels in the Persian Gulf is 2,714, including 101 container ships, 135 crude oil tankers, 229 product tankers, 20 LNG vessels, and 44 LPG vessels.

On the evening of March 22, the Panamanian-flagged container ship “NEWVOYAGER” transited the Strait of Hormuz, becoming the first Chinese shipowner’s vessel to use Iran’s “safety corridor.” This detour route, known as the “Tehran Toll Station,” runs between Iran’s Qeshm Island and Larak Island.

Chinese crew members stuck in the Persian Gulf told China Business Journal reporter that each vessel must apply to Iran’s Islamic Revolutionary Guard Corps for passage; after obtaining clearance, Iranian tugboats will guide the vessel through.

Since March 23, 17 vessels have passed through the Strait of Hormuz, and almost all have used this route. In addition, China Business Journal reporter, viewing ShipVision platform data, found that COSCO Shipping Energy’s stuck VLCCs such as “Yuan Guiyang” and “Yuan Huanhu” are still anchored in safe waters inside the Persian Gulf while waiting.

On March 25, COSCO Shipping Energy said the company is still assessing the security situation. China Merchants Shipowners said that currently there are no vessels stranded in the Persian Gulf, and that oil tanker freight rates on Middle East routes have risen by more than 50% compared with the US-Iran conflict.

On March 26, a freight analyst at East Securities Futures said in a shipping weekly report that in the 12th week of this year, transits through the Strait of Hormuz were 24 ship passages, with no obvious improvement on a month-over-month basis. Operating pressure has increased for transshipment ports outside the Strait of Hormuz, while operations at Red Sea and “ground line” transshipment ports are running normally.

Why are vessel transits still sparse even after the “safety corridor” opens?

According to CCTV International News, local time on March 25, Iran’s Foreign Minister Aragchi said in an interview with Iranian state media that the Strait of Hormuz has not been completely closed; it is only closed to enemies. The region is a war zone, and there is no reason to allow enemy ships and their allies to pass through. For Iran’s friendly countries—or in cases where Iran decides to provide passage convenience for other reasons—the Strait of Hormuz is passable safely. Ships from countries including China, Russia, Pakistan, Iraq, India, and Bangladesh have all transited the Strait of Hormuz safely.

On March 24, Maersk updated its latest assessment for the Middle East, saying that the current situation remains high risk. Along the Strait of Hormuz coastline and in affected countries, strike incidents at the land and ports continue. The company remains highly vigilant, is closely cooperating with local governments and relevant departments, and is doing its utmost to ensure the safety of all crew members and employees, while also ensuring the safety of vessels, ports, and cargo.

Maersk further said that logistics operations continue to face risks of disruption, and the current situation will affect performance. Turbulence in the Middle East region and subsequent network adjustments have triggered broad ripple effects on other regional networks worldwide. Implementation and adjustment of the relevant operating plans require time. Once Q2 operations gradually return to normal, vessel reliability is expected to return to historical average levels.

In terms of fuel supply, ongoing conflict has dealt a serious blow to international markets. Maersk said that due to disruptions to shipping through the Strait of Hormuz, many refineries in the Middle East have been forced to shut down or reduce production, limiting export capacity and causing a major disruption to global supply chains. The company has, as much as possible, reallocated fuel demand to mitigate shortages and obtained alternative energy from different regions and suppliers. Due to fuel shortages in the Middle East and surrounding regions, some vessels have had to bunker fuel in ports, and those ports may charge additional war-zone passage fees, further increasing transportation costs.

Disclaimer: The contents and data in this article are for reference only and do not constitute investment advice. Please verify before making any use of this information. Operate at your own risk.

China Business News Daily (The Daily Economic News)