The recent US strike on Iran on end of February is expected to cause a serious disruption over global logistics. It is expected that shipping price per container will raise for more than $7,000USD for Asia-Mid East routes. The Asia-North American routes are also expected to be impacted as global shipping re-route over Africa.
What Top Stories Suggest
Oil Price to Increase
Oil and gas prices spiked on Monday as the Iran conflict escalated and shipping was disrupted in the Strait of Hormuz. About 20% of the world’s oil and liquefied natural gas flows through the strait every day, making it one of the most crucial oil supply routes on the planet. The spike in oil price was up 7%, a significant figure but is less than what many experts expected. Hence the stock market did better than what is expected from the Iran conflict.
Logistics
The red sea straits route is at a choke point and while some shippings are still going through the route, it is still highly risky as there are uncertainties over potential attacks on cargo. While this does not impact the Asia-Europe nor Asia-America routes, global cargo efficiency is still expected to have some negative impacts. These impacts will likely to result short term shipping rate price peak.
Duration of Impact
The duration of Iran conflict is expected to last at least 1 or 2 weeks minimal. As the foreseeing situation is still unclear, it will take at least 1-2 weeks to determine further duration of the impact.
Is United State Market / Logistic Impacted from Iran Conflict
Unfortunately, the global supply chain, whether Asia-Europe, Asia-America, or Asia-Pacific Ocean routes are all impacted from the current Iran conflict. Shipping expects has expressed that the shipping rate provided by major shipping companies are raising. Announcements has been made that expected a significant raise in shipping rate, even the Asia-American routes. Shanghai to Long Beach route for example, is expected to raise by $3,000 USD a container, making a $5,000 or $6,000 USD shipping rate.
How Does It Influence the Flooring Industry
If the disruption on global shipping is continues, the flooring industry in United States is expected to face increasing in pricing. This will put pressure on construction projects and investments as budgets are being limited. Furthermore, with increasing oil price and tighten oil reserves for Chinese market,
The prediction goes that if the conflict does continue and worsen, in addition to the increasing shipping freight costs, manufacturing costs across China and Vietnam will both raise as a result of increasing energy price. Thus, in unfavourable sentiments, flooring products that are sourced from Asia will raise.
With a more favourable sentiments, experts also expect the conflict to gradually end in one or two weeks. In this scenario, freight costs and oil price could be stabilised more rapidly, thus does not disrupt the global supply chain in significant manner.