Strait of Hormuz blockade sends sea freight rates soaring, costs jump up to 80% [US–Iran war]

As military clashes between the United States of America (US), Israel and the Islamic Republic of Iran intensify and the geopolitical crisis in the Middle East deepens, alarm bells are ringing across Korean industry. The Islamic Republic of Iran has raised the possibility of blocking the Strait of Hormuz, a key energy corridor through which about 20–30% of the world’s seaborne oil passes, prompting concerns that logistics costs will rise as shippers are forced to use alternative routes. If the situation drags on, there are fears that core sectors such as home appliances, automobiles and semiconductors could face a triple blow from soaring logistics costs, unstable energy supplies and weakening local demand.
According to industry sources on the 3rd, major Korean exporting conglomerates such as Samsung Electronics, LG Electronics and Hyundai Motor Group are strengthening supply chain reviews and employee safety measures, taking into account the possibility that instability in the Middle East could be prolonged.
The most significant short-term variable companies are examining is logistics costs. Analysts say that if shippers avoid the Strait of Hormuz, which the Islamic Republic of Iran has threatened to blockade, and switch to alternative sea routes, ocean freight rates could rise by as much as 50–80% compared with current levels. Overland transport and additional customs procedures could also extend delivery times by about three to five days. Industries expected to suffer the biggest impact include home appliances, where Samsung Electronics and LG Electronics rely heavily on container shipping, and the automobile sector, including Hyundai Motor Group. Most large home appliances and finished vehicles are exported by sea, so if the Strait of Hormuz is blocked and vessels are forced onto detours, shipping times will be delayed and logistics costs could surge.
A source in the home appliance industry said, "We naturally expect there will be an impact from higher ocean freight rates," adding, "Our subsidiaries in the Middle East are reviewing alternative logistics routes in case of a Strait of Hormuz blockade and are checking potential demand changes together with local partners." Another industry official noted, "The average profit margin in the auto industry is around 5–10%, so if transportation costs rise by 1–2 percentage points, it could hurt earnings," and went on to say, "In semiconductors and electronics, where air transport accounts for a large share, a sharp increase in air freight rates and delivery risks could become key variables."
soup@fnnews.com Im Su-bin, Jeong Won-il, Lee Dong-hyuk Reporter