Disruptions to shipping through the Strait of Hormuz are
beginning to ripple across African economies, threatening fertiliser supplies,
industrial inputs and trade flows while increasing freight costs and financial
pressure on several countries.
- Disruptions
in the Strait of Hormuz are significantly affecting African economies by
reducing the flow of fertilisers, industrial inputs, and trade goods, and
increasing freight costs. - Dry
bulk goods shipments through the Strait dropped by 83% from February to
March, while fertiliser shipments declined by 92%, threatening food
security and agriculture in Africa. - The
crisis has strengthened the US dollar and weakened African currencies,
increasing the cost of imports and servicing dollar-denominated debt, and
may lead Gulf nations to delay investments in Africa. - Critical
supplies such as fertilisers, rice, sulphur, iron ore, and steel are at
heightened risk, impacting mining, manufacturing, and infrastructure
projects across the continent.
The partial closure of the Strait of Hormuz, combined with
tensions in the Red Sea, has forced vessels to reroute around the Cape of Good
Hope, increasing shipping times, freight rates and insurance premiums for
African trade, according to Atlas Institute.
Freight costs for vessels transiting the Strait of Hormuz
surged to record levels, with tanker charter rates exceeding $400,000 per day,
while war risk insurance premiums rose to as high as 3% of vessel value, up
from about 0.25% before the conflict.
The diversion also threatens Suez Canal revenue as ships
avoid the Bab al Mandab Strait, a narrow maritime chokepoint between Yemen and
the Horn of Africa that connects the Red Sea to the Gulf of Aden, and serves as
a key gateway to the Suez Canal.
Analysts say the disruption has triggered a global “flight
to safety”, strengthening the US dollar and weakening several African
currencies, raising the cost of servicing dollar-denominated debt and
increasing import bills for food, fertilisers and industrial inputs.
Fertiliser supply risks for African agriculture
Besides oil and gas, overall volumes of dry bulk goods via
the Strait of Hormuz fell from 7.5 million tonnes in February to 1.3 million
tonnes in March, an 83 per cent decline, according to maritime intelligence
firm AXSMarine, an 83 per cent decline.
Fertilisers have emerged as one of the most immediate
concerns for Africa’s food security, with shipments through the Strait of
Hormuz falling 92 per cent, from over one million tonnes in February to just
82,000 in March.
Urea and other nitrogen based fertilisers, widely used for
crop production, are typically shipped through the waterway to markets
including Brazil, China, India and Africa.
Industry data shows the Gulf states supply 16.7% of Africa’s
fertiliser imports and up to 25% of nitrogen fertilisers, with East and
Southern Africa most exposed.
Rice supplies also appear particularly at risk, with grain
shipments westbound through the strait into the Gulf plunging 92 per cent from
2.3 million tonnes to 196,000.
Major exporters to Africa; India, Pakistan and Thailand,
purchase 20 to 30% of their fertilisers from the Gulf, meaning disruptions
could raise rice prices later in the year.
Industrial commodities and mining inputs disrupted
Industrial raw materials have also been hit, with ‘bulk
commodities’ including limestone for cement making, sulphur for fertilisers and
industrial chemicals, and gypsum for construction and manufacturing.
Copper producers in Zambia and the Democratic Republic of
Congo rely on imported sulphur for mineral processing, with finished copper
exported to Asia, Europe and the Middle East.
Overall shipments of these commodities through the strait
fell 93 per cent in March, from nearly five million tonnes to 326,000.
Iron ore and steel trade affected
Exports of iron ore through the Strait of Hormuz fell by 65
per cent in March, dropping from more than 530,000 tonnes to 186,000, while
steel shipments declined 93 per cent from nearly 162,000 tonnes to 11,000,
according to AXSMarine data.
The waterway serves as a key transit route for industrial
commodities linking African producers such as South Africa, Mauritania, Sierra
Leone and Guinea with major steelmaking markets including China, India, the
United Arab Emirates and Saudi Arabia.
Finished steel from these countries is also shipped to
African importers such as Nigeria, Egypt, Kenya and Tanzania for use in
infrastructure, construction and manufacturing.
Ultimately, as the war intensifies, the tensions could
prompt wealthy Gulf nations to reassess or delay planned investments in Africa,
while job insecurity among migrant workers in Gulf economies may disrupt
remittances to countries such as Kenya and Uganda. – Business Insider Africa