Manufacturers warn of price hikes as Hormuz crisis disrupts imports

NAIROBI, Kenya, Apr 20 – Escalating tensions in the Middle East, particularly the Iran conflict, have triggered a severe disruption in global maritime trade following the blockade of the Strait of Hormuz.

The narrow but strategically critical waterway responsible for a significant share of global oil and container traffic has become a flashpoint, with reported interference involving US naval forces and Iran’s Revolutionary Guard.

The resulting volatility has constrained vessel movement, pushed up insurance premiums, and disrupted shipping schedules across key global routes, including those feeding into East Africa.

Capital FM Business spoke with the Kenya Association of Manufacturers (KAM) CEO Tobias Olando and below is an excerpt conversation with him.

Q1. How has the Iran conflict and the blockade of the Strait of Hormuz impacted Kenya’s manufacturing sector?

The conflict has severely disrupted Kenya’s manufacturing sector through supply chain shocks, higher logistics costs, and widespread delays in raw material deliveries.

Tobias Olando, notes that over 78.6% of firms have been affected, with freight costs rising by more than 30% for many players.

Delivery timelines have nearly doubled, while raw material shortages and stockouts have become widespread, affecting production continuity across industries.

“Over 78.6% of firms reported being affected by the crisis.”
“Average delivery timelines increased from 28.2 days to about 59.3 days.”

Q2. Which key products or raw materials have been most affected?

A wide range of imported inputs has been disrupted, particularly those sourced from or transiting through the Middle East.

These include aluminum ingots, industrial chemicals, plastics, packaging materials, and textile inputs. The sector is highly exposed, with nearly 96% of manufacturers relying on imported raw materials.

“About 96% of manufacturers depend on imported inputs, many from or through the Middle East.”
“Critical materials such as LLDPE, HDPE, PET and BOPP have been significantly affected.”

Q3. Have freight charges increased, and by how much?

Yes. Freight costs have surged dramatically across multiple routes, with increases ranging from 10% to over 700% depending on origin and container size.

Routes through the Middle East have been the hardest hit, with some 40-foot container charges rising from $1,800 to as high as $10,000.

“Freight charges for 40-foot containers surged from $1,800 to $10,000 on some routes.”
“Average shipping costs across key Middle Eastern ports rose by more than 500%.”

Q4. Will manufacturers increase product prices?

Yes, price increases are highly likely as firms struggle to absorb rising input and logistics costs.

While some manufacturers may delay adjustments in the short term, sustained pressure from freight and raw material costs will eventually be passed on to consumers.

“Most firms are unable to absorb the full extent of these cost increases over time.”
“A portion of higher costs will inevitably be passed on to consumers.”

Q5. What is KAM doing to cushion manufacturers?

KAM is encouraging firms to diversify sourcing, build buffer stocks, and adjust production planning to manage disruptions.

It is also pushing for regional supply chain development under AfCFTA and engaging government on trade facilitation measures.

“Firms are being encouraged to diversify sourcing beyond traditional Middle East routes.”
“KAM is actively promoting market diversification within Africa through AfCFTA.”

Q6. What could be the long-term impact if the conflict persists?

Prolonged disruption could weaken Kenya’s manufacturing competitiveness, raise production costs, and reduce export reliability.

Firms may scale down operations or delay investment due to sustained pressure on margins and supply chains.

“Longer transit times will disrupt production planning and delivery reliability.”
“Persistent delays could slow industrial growth and weaken export performance.”

Q7. Has KAM engaged government on support measures?

Yes. KAM has proposed tax relief on key imports, including IDF, RDL, and VAT on fuel, and is advocating against new taxes during the crisis period.

It is also pushing for improved port efficiency and stronger regional supply chains.

“We have put forward recommendations for targeted tax relief on imported industrial inputs.”

“We are advocating for reduced reliance on imported inputs through local and regional supply chains.”