The ongoing crisis in West Asia has exposed the extreme vulnerability of supply chains. This also affects the clothing and textile industry. FashionUnited has examined why the Strait of Hormuz and the Bab-el-Mandeb Strait are the “lifelines” of textile and clothing trade between Asia and the West. It also looks at what this means for delivery times, costs and smaller companies.
Strait of Hormuz
The Strait of Hormuz is a 34-kilometer-wide waterway between Iran and Oman. As the only sea passage from the Persian Gulf to the open ocean, it is an important link to the Arabian Sea and beyond.
Ships navigating the strait follow a traffic separation zone. This consists of lanes for incoming and outgoing traffic, each three kilometers wide. They are separated by a buffer zone that is also three kilometers wide. Major ports nearby include Jebel Ali, Khor Fakkan and Fujairah (all UAE) and Bandar Abbas in Iran.
The strait is the world’s most important bottleneck for oil transport. It enables the transit of around 20 to 25 percent of the world’s maritime oil trade. A significant portion of liquefied natural gas (LNG) is also transported here. Even a temporary delay can drive up global energy prices.
Bab-el-Mandeb Strait
The Bab-el-Mandeb Strait, also known as the “Gate of Tears,” connects the Red Sea with the Gulf of Aden. At its narrowest point between Yemen, Djibouti and Eritrea it is about 29 kilometers wide. The strait is divided by the island of Perim. The western canal serves as the primary deep-water route for large merchant ships.
As the southern entrance to the Suez Canal, it is an essential corridor for trade between Europe and Asia. In addition to the port of Aden in Yemen, the port of Djibouti serves as an important maritime hub in the Horn of Africa. It acts as a trade and logistics center for Africa.
Longer routes…
The Danish shipping company Maersk announced on Sunday that it would suspend all trips. This affects routes from the Middle East and India to the Mediterranean via the Strait of Hormuz. Also affected are trips from the Middle East and India to the US east coast via the Bab-el-Mandeb Strait and the Suez Canal. Instead, all ships will take the Cape of Good Hope route, adding 10 to 21 or more days to the journey.
In stable times, a ship’s “war risk” premium is only a negligible fraction of its value; it is often only 0.01 percent. However, in times of crisis like the current one, the bill changes overnight and premiums can rise to 0.50 percent of the ship’s value, an increase of 5,000 percent.
… and hidden costs
For example, a single seven-day trip through the Persian Gulf for a modern, large crude oil tanker worth 110 million euros can now cost the owner an additional 550,000 euros for insurance alone. These costs are usually passed on to consumers.
This is how it works: Insurance for a ship is divided into standard insurance for hull and machinery. In addition, there is the above-mentioned war risk insurance for conflict areas. If the risks increase, the insurance companies declare a listed area. This allows you to cancel existing annual policies. An additional premium is then charged for each individual passage. In extreme cases, insurers not only increase prices, but also completely withdraw insurance coverage from ships associated with nations deemed risky. This effectively forces these nations out of the trade route.
But these are not the only hidden costs. There is also the airport fee for cargo that exceeds their grace period. This is usually 48 to 72 hours. After that, things get expensive: If airspace is closed or flights are canceled due to conflict, the cargo that has already been delivered to the airport becomes “stranded”. The terminal is a high security area with high demand. Therefore, the authorities charge high daily fees, the so-called demurrage fees, to prevent storage. The fees can be 100 euros per ton from day four to seven. They increase progressively over time, reaching 300 euros per ton after a week.
For high-value, time-sensitive exports such as pharmaceuticals, electronics or fast fashion, this means that these fees can quickly exceed the value of the freight itself. Exporters are currently demanding government exemptions. They are taxed for war-related delays that are completely beyond their control.
Shortage in working capital for MSMEs
For manufacturers in India, Bangladesh, Vietnam and other South Asian apparel producing countries, the crisis has created a severe working capital squeeze. Since the goods spend an additional two weeks or more at sea, the capital is effectively frozen during transport. Industry insiders note that this delay is putting a strain on the cash flow of micro, small and medium enterprises (MSMEs). They lack the financial resources to survive longer payment cycles.
Ultimately, the volatility surrounding these two maritime veins is a stark reminder. It shows that the global fashion industry depends on much more than just the obvious factors like raw materials and manufacturing; it is also tied to the fragile stability of international waters.
Shipping routes are shifting towards the Cape of Good Hope. Hidden costs like war risk premiums are becoming the new norm. This rewrites business costs in real time. For the apparel industry – from the hubs of Southeast Asia to the shopping streets of Europe – the Gate of Tears and the Strait of Hormuz have become the ultimate stress test of their resilience. This is forcing a fundamental rethink of how goods are transported in an increasingly fragmented world.
This article was created using digital tools translated.
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