Strait of Hormuz Forces Inventory Increase—at a Price
Asset-light corporations are becoming asset-heavier organizations as the on-again, off-again closure of the Strait of Hormuz continues to disrupt global supply chains. During the 30 days preceding Aug. 17, an average of 16.9 ships passed through the Strait transporting 2.2 million barrels of crude and 380,000 barrels of petrochemicals, as reported by The Strait of .. The post Strait of…
The Strait of Hormuz, a critical shipping route, has experienced significant disruptions due to intermittent closures, leading to a notable increase in inventory for asset-light corporations. During the 30 days preceding August 17, the average number of ships passing through the Strait decreased by approximately 84% and 94% compared to the first quarter of 2025, as reported by The Strait of Hormuz Ship Monitor.
This decline has forced import businesses to reroute cargo vessels, resulting in inventory buildup in unprepared African ports. As a result, companies are increasing their inventories and liquidity buffers, with industry insiders viewing this change as permanent. The disruption is expected to add a global average of two days to the cash conversion cycle (CCC) in the second half of the year, impacting various industries such as electronics, pharmaceuticals, textiles, automotive suppliers, metals, and paper.
Companies are advised to consider the financial implications of extended days inventory outstanding (DIO) and price the resulting cash flow hits.
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