Are UAE container shipping costs going to go up after oil price spike?

Dubai: Shipping container rates into and from the UAE could be in for increases, and a cost that businesses will be looking into over the coming weeks. For consumers, any rise in shipping costs could show up in a range of categories and at a time when inflation levels had been dropping.

Supermarket and other retail sources say that there have been no immediate increases on their pricing – “Everything’s good for now,” is how a top official with a leading hypermarket operator. “The prices of all major consumer categories sold through our outlets are steady. It’s too early to say how and whether prices will change.”

But shipping industry sources are tracking container costs by the minute. They have every reason to.

“Container prices are set to fluctuate as crude oil prices have surged nearly 10%,” said Roshmon Manoli Vice President for Freight Forwarding at Dubai-based Consolidated Shipping Services. “This will impact shipping costs - alongside a sharp rise in war risk insurance premiums.”

Everything hinges on the immediate future of Strait of Hormuz, which handles about 20% of the global movement of crude oil. If there is any move to create bottlenecks to tankers passing through, then that would be the trigger for sharp increases in oil prices.

“Already we have seen 80% of vessels have steered clear of the Red Sea, opting instead for the Cape of Good Hope route,” said Manoli. (This was after the October 7, 2023 attack on Israel by Hamas, and which then led to the Houthis in Yemen firing upon ships using the Red Sea.  

“In the event if the Strait of Hormuz is blocked, ships may be forced to reroute to alternative transshipment ports outside the Middle East, increasing congestion at key Asian ports,” said Manoli. “This again disrupts supply chains and drive up shipping costs and transit times. As the situation continues to unfold, the full impact remains uncertain.”    

Apart from container costs, shippers and businesses in the UAE also have any changes to marine insurance premiums to factor in. Again, there are many learnings that shippers and insurers have already learnt from the Red Sea crisis of 2024.

“One area where we’ve seen uniformity across insurers is in territorial exclusions,” said Avinash Babur, CEO of InsuranceMarket.ae. “Insurers are not providing cover for shipments to, from, or even transiting countries that are currently at war or considered high-risk.

“This includes places like Iran, Iraq, Yemen, Syria, Russia, and others listed on the Joint Cargo Committee’s cargo watch-list.

“For now, marine premium pricing is holding steady, and there’s no indication of sudden corrections in the short term.”