Phones, plumbing, more: The unknown vital goods cut off by Iran war
When the US hurled itself into a war alongside Israel against Iran earlier this year, much of the rest of the world abruptly learned the significance of the phrase “Strait of Hormuz”.
About a fifth of the world’s pre-war oil supply passed through the narrow waterway, which Iran promptly shut down with attacks on commercial shipping.
The Strait of Hormuz is one of the world's most critical energy supply routes. Getty
But while the oil understandably gets the headlines, the strait is a key artery for multiple other critical commodities that affect everything from our porridge to our smartphones.
“When you’re refining crude oil, you make 10 different products,” supply chain expert David Leaney told nine.com.au.
“Three of those are fuel.”
Here’s everything else you might not know Iran is squeezing off from the world when it shuts the strait.
Natural gas
Qatar produces about 20 per cent of the world’s natural gas - a vital exporter for much of the world.
Iran, however, targeted Qatar’s production facilities early in its rounds of retaliatory bombing against US-friendly Gulf states, and quickly put them out of action.
Unlike most of the world, Australia could, with a sufficiently jaded eye, see this as a silver lining.
Leaney said the removal of Qatar from the global gas market made our own extensive reserves that much more strategically important.
This became particularly evident during fears of a fuel crisis in early weeks of the war, when Australia was able to drive good bargains for fuel in exchange for natural gas, particularly in south-east Asia.
“It’s why we don’t really have a fuel problem,” Leaney said.
And given the precariousness of the situation in the Middle East, Leaney said, it could remain an Australian advantage for a long time yet.
“(Qatar) are pretty amazing at rebuilding stuff when they throw money at it,” he said.
“But it could be a year or more.”
Australia’s natural gas reserves have been a strategic boon. Glenn Campbell
Helium
“Helium is not just useful for incredibly funny squeaky voices at parties,” Leaney said.
The gas is also necessary for hi-tech applications, including the construction of semiconductor chips and even the operation of MRI scans.
While Australia doesn’t directly import helium, Taiwan, and specifically the world-leading Taiwan Semiconductor Manufacturing Company, does.
And those chips go into products like smartphones and AI devices that Australia does have a great deal of use for.
“It doesn’t stop things today, but we’ll see pressure on prices, manufacturing delays,” Leaney said.
TSMC in Taiwan imports helium through the Persian Gulf. nna\josh.hohne
“You don’t want to be running low on helium.”
But he estimated there was only a small, unlikely chance that Australia’s MRI machines would be affected.
Construction materials
Think PVC and plastic piping, all the plumbing going into new projects around the country - a lot of it is oil refining byproduct.
The same goes for some metals needed for construction, and even tar and bitumen for roads.
“The costs of construction is going pretty nuts,” Leaney said.
The impact of the Iran war is a bit trickier to gauge in Australia in this case, as the national construction industry, particularly as relates to housing, was already facing myriad setbacks.
“Capacity and costs of construction were already a challenge to development feasibility before the closure of the Straight of Hormuz, due to labour shortages, planning delays, finance costs, and infrastructure mixed in with material costs,” Urbis national housing sector lead Mark Dawson said.
“The conflict adds another layer of inflationary pressure via the cost of fuel and derivative materials and uncertainty around logistics.”
Dawson said the delivery of housing was getting “hit from both sides”, as builders were faced with higher costs while buyers struggled against higher interest rates.
“So, we know that Australia already had a housing delivery problem, linked to feasibility – driven by higher costs and challenges in achieving the revenues required to overcome them,” he said.
“But now we have an extra dimension of volatility from the conflict in the middle east.
“Uncertainty, risk, delays, higher input costs, and flow-on to higher contingency will likely be factored into new development assessment.”
Urea
Given Australia’s status as a food exporter, this chemical - vital to the production of both fertiliser and the clean running of diesel engines - did attract some headlines early in the war.
And again, 20 per cent of it passes through the Strait of Hormuz - or did.
Winter crop plantings like wheat may have been affected. iStock
But Leaney said Australia was yet to feel the full impact, even if our farmers know it’s coming.
Critical shortages of urea in the early stages of the war had an impact on farmers looking to plant winter crops - including stapes like wheat, barley, oats, and canola.
“Australia is a big importer of fertiliser through the Persian Gulf,” Leaney said.
The growing impact would become more evident towards the end of the year, Leaney said, when smaller crop yields push prices up all the way to the supermarket shelves.
He said the government had been putting “a lot of effort” into securing additional urea supplies; not just for fertiliser but for diesel exhaust additive AdBlue, which runs diesel engines cleaner and more efficiently.
“Without diesel, the country stops,” Leaney said, pointing to the fuel’s ubiquity in bulk transport vehicles such as semi-trailers and trains.
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