DP World CEO warns Hormuz rerouting will lift prices

The head of DP World says the cost of moving trade around the Strait of Hormuz will reach shoppers well outside the Middle East. Group CEO Yuvraj Narayan warned that rebuilding supply chains to avoid the strait will eventually push up consumer prices far beyond the Persian Gulf, Bloomberg reported on October 30. The disruption to Mideast trade has dragged on for months, and the Dubai-based port operator is among the companies hit hardest.bloomberg.com

Jebel Ali at a Fraction of Capacity

Cargo traffic at Dubai's Jebel Ali port, the center of DP World's network, has fallen by 90% since the U.S.-Iran conflict made the waterway effectively unusable, according to The Wall Street Journal. The company is moving goods by road and rail to ports on the Gulf of Oman and the Red Sea, and as far as Turkey. It has added 700 trucks to its fleet and committed $500 million to a new port outside Hormuz, the Journal reported.wsj.com

Narayan has said DP World expected Jebel Ali to bring in $1 billion to $1.2 billion in 2026. With the port running at about 10% of capacity, the company now expects no earnings from it this year, he told The Economic Times. "Something that used to cost $1,000 will now cost $10,000. This will have an inflationary impact and, at some point, will begin creating shortages," he said in that interview.economictimes.com

He told The Times of India that moving the same amount of cargo now takes roughly 30% more vessel capacity worldwide. Energy and insurance costs are also climbing, and that cost "is going to be ultimately paid by consumers." He added that traffic would return within about 60 days if the strait reopened.timesofindia.indiatimes.com

Insurance and Longer Voyages

A Middle East Council on Global Affairs analysis published October 29 found that commercial transits through Hormuz have fallen about 90% since late February. By late July, war-risk insurance for Hormuz crossings had risen to between 7.5% and 10% of a vessel's hull value, up from a fraction of 1% before the war. The same analysis says sailing around the Cape of Good Hope can add about 3,000 nautical miles and ten days to a voyage between Asia and Europe. Brent crude, which traded near $72 before the war, was still around $106 in mid-October.mecouncil.org

Resilience Over Efficiency

Narayan has argued that the era of just-in-time supply chains is over and that companies will now pay to keep spare capacity. "Everybody also asks me, who is going to bear the cost? The answer is easy—the consumer," he told Business Today. In an earlier interview with CNBC-TV18, he said, "inflation is written all over a situation like this."cnbctv18.com+1