In the wake of the 12-day US-Israel and Iran war a year ago, Siemens Energy AG sent a person driving from Saudi Arabia’s Red Sea port of Jeddah across the Arabian peninsula to the industrial hub of Dammam to study an alternative route in case the crucial Strait of Hormuz was shut down.
The German company commissioned the person to take readings along the almost 2,000-kilometer (1,240-mile) route to compile a 250-page document analyzing whether it was possible to truck massive gas turbines across the desert to its facilities in Dammam. Less than a year later, those plans were put into action as the latest conflict and the closure of the strategic waterway forced companies to reroute supply chains to keep operations and economies running.
“It adds more time, adds a bit of cost too, but it did not stop the business,” Karim Amin, head of the gas services unit of Siemens Energy, said last week.
The blockage of Hormuz caused one of the biggest logistics disruptions in years, sending countries and companies rushing to find bypasses to ensure availability of food, medicines and other critical material. Roadways crisscrossing Saudi Arabia, the United Arab Emirates and Oman have emerged as critical conduits, even though they can cover only part of the shipping capacity and add to both costs and time.
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The US and Iran have now agreed an interim agreement that should restore flows through the narrow corridor, but a return to normal trade is still months away. The two sides will meet on Friday to sign the deal but have yet to release the fine print, keeping shipowners and other logistics providers on edge.
To keep shelves stocked, grocery chain Spinneys used a new route that included haulage by road to bring goods from the UK to the UAE, almost 5,000 kilometers away, according to an earnings presentation in May. DP World Ltd., one of the world’s biggest container port operators, has started using a network of roads running through the Arabian peninsula and as far away as Turkey and Iraq after the near-blockage of Hormuz cut traffic to its massive port of Jebel Ali in Dubai.
“Alternative routing such as land bridges and smaller ports may be more cumbersome, but it is working,” said Peter Sand, chief analyst with Xeneta, a digital freight platform based in Oslo. “Even if the Strait of Hormuz reopens, shippers will be cautious about returning to an over-reliance on ports such as Jebel Ali because the geopolitical situation will remain fragile and a sudden deterioration puts them back to square one.”
Hormuz risk means that some of the workarounds involving trucks and rail could become permanent. Spinneys plans to keep using the road-freight option to transport medium shelf-life products from Europe to the UAE.
“Disruption made us move faster,” said Farid Belbouab, CEO of Gulftainer, which operates the Khor Fakkan port in eastern UAE, just outside the Persian Gulf and the Hormuz strait. “Long term, the east coast isn’t a backup — it’s core to the UAE’s trade architecture.”
