Container shipping ports in Singapore have so far not been impacted by the conflict between Israel and Hamas, despite reports of congestion and a backlog of cargo at the Israeli ports of Haifa and Ashdod, as well as the closure of smaller ports around the coastal Gaza enclave.

“Israeli ports handle about 0.4 per cent of the world’s container throughput, so disruptions to the global container trade flow are limited. Impact on Singapore’s container volumes is very minimal,” a spokesman for Singapore port operator PSA told The Straits Times on Tuesday.

Nevertheless, the Maritime and Port Authority of Singapore (MPA) is monitoring the security situation in the Middle East amid global concerns that the conflict could trigger broader regional tensions, a spokesman said.

Should it spread beyond Israel and Gaza and turn out to be long and drawn out, the conflict could introduce risks to two vital shipping choke points in the Middle East, said Mr Christian Roeloffs, chief executive of shipping and logistics platform Container xChange.

The two choke points are the Suez Canal in Egypt, a critical maritime trade route connecting Europe and the Middle East to Asia; and the Strait of Hormuz between Oman and Iran, the only waterway enabling oil to be transported from the Gulf region to the Indian Ocean and beyond.

Said Mr Mick Aw, senior partner of maritime consultancy Moore Stephens: “If the Suez Canal is affected, ships will have to take the longer route around Africa. This will significantly increase the cost of shipping from places like Europe to Asia, including Singapore.”

In 2021, when passage through the Suez Canal was blocked for weeks by a large container ship that ran ashore, the cost to ship a 40-foot container from China to Europe reportedly almost quadrupled to US$8,000 (S$10,970) from rates a year prior.

Shipping oil and other petrochemicals would also get more expensive, with the prices of oil and gas tanker stocks having already risen moderately since the conflict, Mr Aw added.

So far, passage through the Suez Canal and Strait of Hormuz has not been affected, and MPA has not received notifications of disruptions to shipping in that area by Singapore-flagged ships, the spokesman said.

Still, MPA has advised “shipowners, managers, operators and masters of Singapore-flagged ships to assess the risks and review their ships’ maritime security plans and implement necessary risk mitigating measures when trading in that area”.

Disruptions caused by the fighting in Israel and Gaza are already leading to some shipping bottlenecks that could cause delays to deliveries at other ports of call, analysts said.

In an update to customers on Oct 12, shipping line MSC said congestion is mounting at Israel’s Ashdod port due to increased security checks and labour shortages. Ashdod has also imposed restrictions on the transport of hazardous materials, which has added to longer transit times.

Ships to Ashdod are now being diverted to the Port of Haifa, where operations continue under manpower limitations.

But the security risks for goods unloaded there are rising.

Last week, shipping line Evergreen declared a force majeure on goods diverted from Ashdod to Haifa, saying it would no longer accept responsibility for the goods after they are discharged.

Force majeure refers to an unforeseeable event that makes it either impossible or commercially impracticable for contracted parties to fulfil their contractual obligations.

Meanwhile, Israeli shipping line Zim has told its customers that its insurers are now demanding an additional war risk insurance premium on all vessels calling at Israeli ports. The premium is now being charged at cost on cargo to and from Israel, and is subject to changes every 24 hours.

For the rest of the economy including other shipping sectors, the economic and geopolitical uncertainties and potential supply chain disruptions that result from the conflict will be cause for concern, Mr Aw said.

He added: “As we have learnt from the pandemic, freight rates can spike significantly during a period of supply chain disruptions.”

Mr Roeloffs said that such disruptions, depending on how long they last, could eventually lead to a shift in the global transportation of goods, with Israel’s exports to China, the United States, Germany and India likely the first to get impacted in the coming weeks.

Source: The Straits Times