Iran war cost will be passed to consumers, shipping giant boss tells BBC

BBC

Maersk chief executive Vincent Clerc spoke to the BBC

Increased shipping costs driven by the conflict in Iran will be passed on to consumers, the boss of the world's second biggest shipping company has said.

"We have traditional contracting mechanisms that pass on this fuel fluctuation, whether they go up or they go down, onto the customers," Vincent Clerc, the boss of Danish shipping giant Maersk, told the BBC in an exclusive interview.

"So what it means is that ultimately, in this case, these increases will pass to our customers and will pass on to the consumers."

The Danish firm is dominated by its container shipping arm, which plays a vital role in moving consumer goods such as toys, clothing and electronics around the world.

He called on the US, Israel and Iran to come to "some kind of deal" to restore global trade routes in the Middle East, saying that would be a better option than escorts from Western navies to reopen the waterways.

The war between Iran, Israel and the US has brought two vital shipping routes to an almost complete standstill and caused widespread disruption to the global economy.

At the same time, the world's largest shipping lines are also avoiding passage through the Red Sea due to security threats.

Clerc said: "Ultimately we need to get back to something where freedom of navigation and peaceful navigation is restored."

The higher cost of longer voyages around the Cape of Good Hope and higher oil prices mean that shipping is becoming more expensive, adding to upward inflationary pressures, he added.

"The main concern is the safety of our crews, is the safety of our assets," Clerc said.

He said that as long as the significant threat of drone strikes remains, with no guarantee of a truce between the two sides, "it is very hard for us to put our colleagues and our ships in harm's way".

According to the UN's International Maritime Organisation (IMO), at least seven seafarers have been killed in the Strait of Hormuz since the conflict began, with several others injured.

In a speech to an IMO committee on Monday, Secretary General Arsenio Dominguez said: "These seafarers are simply carrying out their duties and performing an essential service to the global community, ensuring the continued flow of goods and energy, and they must be protected from the consequences of broader geopolitical tensions."

Iranian government spokesperson Fatemeh Mohajerani justified the blockade by saying the country needed to maximise "all resources", including the Strait of Hormuz, whilst in a state of war.

Before the conflict, around a fifth of global oil supplies travelled through the Strait of Hormuz, which is effectively closed because of Iran's threats to target shipping.

'International shipping operations'

Clerc told the BBC: "We have traditional contracting mechanisms that pass on this fuel fluctuation, whether they go up or they go down, onto the customers. So what it means is that ultimately, in this case, these increases will pass to our customers and will pass on to the consumers."

Elsewhere, China's transport ministry on Tuesday said it had called in executives from Maersk and another shipping firm to discuss their "international shipping operations".

The talks were reportedly called to complain about higher freight charges amid the war in Iran.

The extra costs work out at around $200 for a standard 20ft shipping container, which means "anything from a 15% to a 20% increase on some of the freight cost", Clerc said.

Maersk's rivals, MSC and Hapag-Lloyd, have also increased charges due to Iran-linked disruptions to their services.

He said the disruption caused by the war has had a "profound impact" on Maersk, the world's second-largest shipping company, with many customers not receiving regular deliveries they were expecting.

Clerc warned that this is "extremely disruptive" in a region heavily reliant on imported food.

It means there are a lot of logistical challenges to "keep the food moving" and make sure that it "continues to be on the shelves of supermarkets" rather than going to waste as it sits on ships or in ports.