TOKYO, Apr 27 (News On Japan) - The impact of the effective closure of the Strait of Hormuz is spreading to Japan's export industries, dealing a fresh blow to automakers and other companies reliant on Middle East trade routes.
At a used car storage facility in Japan, rows of pre-owned luxury vehicles such as Lamborghini and Ferrari stand ready for export.
Takashi Nakano of Japan Carrier said the vehicles are stock units intended for shipment to Arab markets in the Middle East.
'Left-hand-drive luxury cars are especially popular in the region,' Nakano said.
The Middle East has long been a crucial market for automobiles. Last year, the top destination for used car exports from Japan was the UAE, or United Arab Emirates.
Along with strong demand for luxury vehicles from wealthy buyers, the region has also served as a re-export hub for Africa. However, the closure of the Strait of Hormuz has made direct shipments difficult.
The disruption is also affecting new vehicle exports.
Toyota Motor said on Monday that its exports to the Middle East in March nearly halved from a year earlier. Nissan Motor also reported a decline of about 17%.
Companies are now seeking alternative routes to keep goods moving.
Nakano said vessels are now calling at ports in Oman before the Strait of Hormuz, with cargo then transported overland into the UAE.
The used car exporter has opened substitute shipping routes through two ports in Oman, with vehicles then delivered by land to the UAE. Nissan has also developed multiple routes, including those passing through the Red Sea.
Efforts to secure backup logistics routes are spreading to other sectors.
Ken Okazaki, chief financial officer of Fast Retailing, said on April 9 that the company had taken transport measures to avoid major disruption to production and logistics.
Fast Retailing, operator of Uniqlo stores worldwide, relies on air cargo routes to Europe that would normally pass through the Middle East.
Okazaki said the company had already secured alternative air routes that do not pass through the region.
'For the immediate term, we are able to manage operations,' he said.
The company has also reviewed land and sea freight options.
Still, experts warn that substitute routes come with challenges.
Takuma Matsuda, professor of economics at Kanagawa University, said transport costs, insurance premiums and overland shipping charges are naturally higher than on standard routes.
If additional costs continue to rise, they are likely to be passed on to retail prices, he said.
Japanese companies are striving to prevent exports from falling to zero, but the search for workable alternatives is likely to continue.
Source: TBS
