Iran war disrupts Asia's used-car trade

The U.S. and Israeli strikes on Iran last month plunged the Middle East into crisis, disrupted global shipping routes and spawned a series of headaches for used-car dealer like Umar Ali Hyder Ali.

Hyder Ali, who ​has lived in Japan for two decades, ships used cars from his adopted home to South Asia, the Middle East and Africa, where the vehicles are highly sought for their ‌durability and relatively good condition, thanks to strict Japanese regulations that require regular inspections and maintenance.

Speaking to Reuters in his native country Sri Lanka, Hyder Ali said his shipments of more than 500 cars were stuck at sea -- the vessel was unable to get into Sri Lanka because the port had filled up with cargo diverted from Dubai.

Some of his cars managed to offload in Sri Lanka, while some were diverted to a port in China's Zhuhai. Some of his vehicles may end up being brought ​back to Japan, he said.

Some ships plan to unload cargo at alternative locations in the Middle East or further afield to avoid the Strait of Hormuz, dealers said, adding that the rerouting decisions were largely being made by shipping lines.

Air freight could be an option for some clients, he said, but the high cost would only make it possible for the wealthiest, Hyder Ali said.

Hyder Ali's woes illustrate how the Middle East crisis and the near-closure of the Strait of Hormuz are upending ​business for used-car traders in Japan and South Korea, mostly small businesses that together make up a large, global-spanning industry.

Japan and South Korea exported a combined $19 billion worth of used cars last year, with Japan accounting for a little more than half of that. More than a third of the 883,000 used cars South ​Korea exported last year went to the Middle East, trade data showed.

In South Korea, the conflict has halted shipments during what is usually the busiest season for used-car dealers, as demand usually peaks from March to September, due to travel and construction activity in the Middle East and elsewhere.

Park Young-hwa, president of the South Korea Used Car Export Association, said the network to the Middle East is 'more or less paralysed”.

The Middle East also served as a ‘transit station' for cars heading Turkey and eastern Europe.

With vehicles and other goods meant for the Middle East piling up in storage yards and ports, containers are getting harder to secure amidst upticking shipping costs, Park said.

He added, some of the shipments that left in January still have not been offloaded at their destinations. Some managed to offload in neighbouring countries, while some were turning back to South Korea.

Popular models among Middle Eastern buyers include Hyundai Motor's Avante MD and Kia's K3.

The Strait of Hormuz, a narrow shipping lane between Iran and Oman, is a bottleneck for shipments routed through Dubai. If the war drags on, exporters face compounding pressures, from higher oil and freight costs to currency swings, weaker auction prices ‌and possible cuts ⁠to shipping routes.

Production: Channa Kumara, Waruna Karunatilake, Dogyun Kim, Jungmin Ryu, Heejung Jung, Angie Teo/Reuters