As geopolitical tensions in the Middle East have recently escalated, Korea’s shipping industry is facing a ‘triple burden’ of rising oil prices, soaring charter rates, and exchange rate pressures.

In particular, analysis suggests that the overall cost structure of shipping companies is being shaken as oil tanker charter rates have more than doubled in a short period, with international oil prices and the won-dollar exchange rate rising in tandem.

According to the shipping industry on March 13, oil tanker charter rates have surged more than twofold following the Iran crisis.

Oil tanker charter rates, which were in the $200,000 range at the end of February, soared to $475,700 early this month. Although rates have since declined, they remain in the $400,000 range.

When a single vessel is unable to determine its route and remains on standby at sea, charter fees of tens of millions of won per day accrue for large ships.

In particular, as charter fee payments are made in dollars, a rise in the won-dollar exchange rate also increases the actual cost burden.

As of that day, the won-dollar exchange rate stood at 1,490 won, approaching the 1,500 won level.

With international oil prices also rising on top of this, the shipping industry’s transportation cost burden is expanding in all directions.

In the shipping industry, fuel costs (bunker) constitute a significant expense, accounting for approximately 20-30% or more of total operating costs.

Accordingly, shipping companies typically enter into Bunker Adjustment Factor (BAF) contracts with shippers to partially offset the burden of rising oil prices.

This method adjusts freight rates based on the average oil price over a specific period, ultimately leading to increased logistics cost burdens for shippers.

However, in the case of spot purchasing, where fuel is bought as needed without long-term contracts, fuel cost burdens are directly reflected in high oil price environments like the current one.

Shipping companies have maintained spot purchasing ratios at the 20-30% level to respond nimbly to market conditions and optimize costs.

However, with the recent surge in oil prices, this strategy is now acting as a cost burden factor instead.

A shipping industry official said, “Vessels currently inside the Strait of Hormuz are having difficulty operating at all, effectively incurring opportunity costs.”

The official continued, “While operational methods differ from company to company, shipping companies with higher chartering ratios will inevitably face greater cost burdens.”

Source: BusinessKorea