The most powerful shipping executives in the world are gathered in Athens this week for the annual International Shipping Exhibition. The hot topic: the Strait of Hormuz.
President Donald Trump has said the strait’s reopening is imminent. Administration officials tout ships getting through the vital chokepoint.
Yet most shipping executives remain unwilling to send their cargo ships through the 21-mile channel until the United States and Iran strike a definitive peace agreement that includes the safe reopening of the strait.
The strait’s closure continues to cut off 20% of the world’s oil supply from global markets, along with liquid natural gas and fertilizer needed for a functioning global economy. After oil prices fell last week on hopes of an agreement to reopen the strait, oil futures shot up Monday following a weekend of renewed fighting in the region and reports Iran had broken off peace negotiations.
According to research firm Kpler, only seven ships on Friday passed through the strait — five entering and two exiting. Over the weekend, just four additional ships left the strait. One hundred cargo-carrying vessels typically move through the waterway daily, according to shipping-data provider Lloyd’s List.
“Traffic still remains exceptionally depleted,” Matt Smith, director of commodity research at Kpler, told CNN. “Barring a handful of tankers crossing each day, the strait remains essentially closed.”
Since current traffic is only a trickle compared to normal, industry officials do not believe it will make a significant difference to global markets.
It will take more than a “limited number of successful transits” to restore confidence, Gene Seroka, the executive director of the Port of Los Angeles, who spent half a decade working for American President Lines in the Middle East, told CNN.
“The larger issue is whether carriers, insurers and vessel operators have enough confidence in the long-term security environment to resume regular service patterns,” said Seroka.
Efforts last month to have the US military guide commercial vessels out of the strait through “Project Freedom” proved to be short-lived.
Despite reports of new naval escorts in recent days, a spokesperson for US Central Command said that had not happened.
“Though US forces are not escorting, we continue to communicate and coordinate with commercial ships seeking to freely and safely transit the Strait of Hormuz,” said Captain Tim Hawkins, a spokesman for the command.
Industry sources confirm it’ll take time for normal traffic to resume.
“Our general sense is that the threat to ships crossing the Strait is still significant, and we will not see a full resumption of traffic through the strait until there is a stronger guarantee of safe passage,” an oil industry source told CNN on Monday.
On Monday, a cargo vessel traveling in the northern Persian Gulf was struck by an unknown projectile, according to a British military-run maritime security organization. There have been 39 vessel strikes in the region and 11 deaths since the war began, according to the International Maritime Organization.
Container ships that typically deliver much of the food and other goods to Gulf states have also been trapped by the strait’s closure. Maersk, one of the world’s largest container shipping firms, has not had a ship leave since mid-May. Six Maersk ships are still trapped in the Gulf.
Shipping industry sources said it is critical that no restrictions or fees be imposed on ships once the strait reopens.
“As shipping comes under increasing pressure from geopolitical events, we must do all we can to work together to always put the safety of seafarers first,” Arsenio Dominguez, secretary general of the IMO, said at the shipping conference in Greece on Monday. “I call on the industry to stand with IMO in defending the principle of freedom of navigation, including the rejection of tolls and discriminatory transit measures.”
Rates for shipping in the rest of the world have already jumped because of the disruptions. Heidmar, a Greek tanker operator, reported a more than 200% increase in revenue in the first quarter of this year compared to last year, mainly because of what CEO Pankaj Khanna described as “historically elevated” shipping rates.
Chevron CEO Mike Wirth said it will take time to restore confidence shaken by the war.
“You need new ships to come back in, and ship owners have to be comfortable sending crews back after being trapped for months,” Wirth told Bloomberg on Friday. “Clearing out inventories to allow (oil) fields to restart and repair damage won’t happen overnight.”
