A prolonged Middle East war would weigh heavily on global trade and keep fuel costs elevated, chairman and president Enrique K. Razon Jr. of International Container Terminal Services Inc. (ICTSI) warned on Thursday.
At the global company’s recent stockholders meeting, Razon said disruptions in key shipping routes are already affecting trade flows, particularly in Asia, which is ICTSI’s largest market.
“The longer the war takes to be settled, the larger the impact on the global economy. So if the war lasts for several more months, there will be a strong impact on global trade,” he said.
Razon noted that Asia is bearing the brunt of the disruption compared with Latin America, which benefits from its proximity to major suppliers such as the United States, Canada, Mexico and Brazil.
“It’s mostly felt in Asia. Asia is the most affected by the closure of the Strait of Hormuz,” he said.
Diversified portfolio
Still, he said, the impact on ICTSI’s Iraq operations is being offset by stronger performance across its other terminals.
While ICTSI’s terminal in Iraq is directly exposed to the conflict, Razon said the overall impact has so far been cushioned by the company’s geographically diversified portfolio.
Despite having a continuous oil supply, rising fuel costs have added pressure to operations, Razon said. Diesel remains available but at significantly higher prices.
“As of today, there is still a diesel supply but at a high price, and until the war is over or settled, prices will remain high,” he said.
To mitigate the impact of the higher fuel costs, ICTSI has implemented tariff and handling rate adjustments across its global terminals.
“And this is why we have already implemented adjustments to our tariffs and handling rates to make up for the differential in diesel and fuel prices throughout our terminals in the world,” he said.
Razon said the company continues to coordinate with various governments and agencies to help ensure a stable fuel supply, particularly for the Philippines.
He expressed hope for a swift resolution to the conflict to restore normal trading conditions.
“Hopefully, the warring parties can end this soon, and we can get back to normal trading routes in the world,” he said.
$740-M capex
ICTSI has set aside about $740 million in capital expenditures this year, higher than the $650.44 million spent last year, to fund expansions and upgrades across its global terminal portfolio.
Razon said the planned spending will go mainly toward ongoing and new projects in Brazil, the Democratic Republic of Congo, Mexico with the completion of Phase 3B at Contecon Manzanillo, and the Philippines with the expansion of local terminals.
The funds will also cover new developments in Honduras, Australia and Ecuador, as well as equipment acquisitions, upgrades, and maintenance across its operations.