(Comprehensive Report, April 2, 2026)
Ongoing geopolitical tensions in the Middle East have sent international crude oil prices soaring since late February 2026. A late-March Reuters survey based on 38 economists and analysts showed that the average forecast for Brent crude in 2026 now stands at $82.85 per barrel – an upward revision of $19 from the pre‑conflict forecast of $63.85 in the February survey. This marks the largest single‑month upward revision on record. Goldman Sachs has raised its full‑year average forecast to $85 per barrel.
This “oil price storm” is now transmitting through multiple channels – direct fuel costs, building material supply chains, and shipping logistics – to the waterway engineering industry, which relies heavily on fuel‑powered equipment.
Waterway engineering is a quintessential energy‑intensive industry; its core operations depend heavily on fuel‑powered equipment. According to the Dredging Engineering Budget Quota (JTS/T 278‑2‑2019) and relevant industry case studies, diesel consumption for cutter‑suction dredgers accounts for a significant share of project costs. One case analysis shows that diesel costs represent about 25% of the comprehensive unit price of dredging works. Moreover, together with maintenance and depreciation, fuel costs are one of the three main factors affecting the construction cost of cutter‑suction dredgers.
On the price transmission mechanism, on March 23, 2026, China’s National Development and Reform Commission (NDRC) adjusted refined oil prices. The price of domestic gasoline was effectively raised by RMB 1,160 per tonne and diesel by RMB 1,115 per tonne, compared with theoretical calculations based on the current pricing mechanism (which would have called for increases of RMB 2,205/tonne for gasoline and RMB 2,120/tonne for diesel). Since the beginning of 2026, China’s maximum retail price ceilings for refined oil products have undergone six rounds of adjustments. After the latest adjustment, gasoline and diesel prices have accumulated increases of RMB 2,320/tonne and RMB 2,235/tonne respectively from the end of 2025. Although the regulatory intervention has partially mitigated the shock, waterway engineering enterprises still face significant upward pressure on fuel costs.
On the international shipping front, tensions in the Strait of Hormuz have worsened the situation. The Baltic Exchange Dirty Tanker Index (BDTI) climbed to 2,866 points on March 3, a single‑day surge of 23.43%. Bunker fuel prices at the world’s top 20 ports nearly doubled, with low‑sulphur fuel oil approaching the peaks seen during the Russia‑Ukraine conflict. The fuel cost of a single voyage has increased by US$200,000–300,000. Longer shipping distances and route diversions around the world have further pushed up logistics costs for imported equipment and components.
Crude oil is a core raw material for asphalt, waterproofing materials, resins, coatings, etc. According to industry monitoring, domestic asphalt prices climbed steadily in the first quarter of 2026. By March 24, the average domestic asphalt price reached RMB 4,469/tonne, an increase of RMB 1,107 (or 32.9%) from the February low. From the beginning of the year, asphalt prices have risen from about RMB 3,000/tonne to RMB 3,350–3,400/tonne, an increase of roughly 12–17%.
In contrast, price increases for basic building materials such as rebar and cement have been relatively modest. Data from Millionbce.com (Bainiandata) show that in March 2026, the national average price of rebar rose only 0.57% month‑on‑month and actually fell 1.61% year‑on‑year. Cement prices fell 0.03% month‑on‑month, remaining broadly stable. In Xuzhou, steel prices fell about 0.65% month‑on‑month in February, and cement prices were cut by RMB 3/tonne. This indicates that while the direct impact of higher oil prices on basic construction materials is not yet prominent, petrochemical‑based materials such as asphalt have already entered a price‑rising channel.
A more worrying factor is the impact on transportation. Higher oil prices directly squeeze the transport costs of bulk, low‑value materials such as aggregates and cement, leaving traders caught between rising freight costs and stable ex‑factory prices. The tense situation in the Strait of Hormuz has also caused freight rates on Middle East routes to soar – the Persian Gulf route saw a weekly increase of over 70%, and several foreign shipping lines have announced emergency conflict surcharges of US$1,000–3,000 per container.
On the cost side, the sharp rise in fuel expenses directly erodes project profits. This is especially true for fixed‑price contracts that lack fuel‑price adjustment clauses – profit margins on already‑won but not‑yet‑started projects are being severely squeezed. Rising transport costs for building materials further increase pressure on enterprise working capital.
On the supply chain side, the “effective closure” of the Strait of Hormuz combined with security risks on the Red Sea‑Suez Canal route creates a double squeeze. The global logistics paradigm is shifting from efficiency‑first to safety‑first. Many freight forwarding companies have suspended cargo acceptance on Middle East routes, and delivery lead times for some imported equipment and components have significantly lengthened.
Demand‑side divergence is also notable. Projects led by the government – such as waterway improvement and port construction – benefit from state infrastructure investment budgets and remain relatively stable. In contrast, projects with significant private capital participation may face budget tightening under high cost conditions.
Facing cost pressures from high oil prices, the industry is making adjustments on multiple fronts:
Operations optimisation – Rational dispatching of vessel fleets, reducing idle sailing, and lowering dredger speeds can reduce fuel consumption to some extent. Some enterprises have begun to phase out or retrofit old, high‑fuel‑consumption equipment to improve energy efficiency.
Contract management – Including fuel‑price adjustment clauses in new bids (e.g., triggering a price adjustment when oil prices exceed a baseline by a certain margin) is becoming industry consensus. Some ongoing projects are actively negotiating with owners for cost compensation or schedule extensions.
Green transition – The adoption of electric and LNG‑powered vessels is accelerating. In newbuild and retrofit projects, the share of new‑energy equipment is expected to gradually increase, reducing the industry’s long‑term dependence on diesel. At the same time, the industry is shifting towards higher‑value‑added, lower‑energy‑intensity activities such as maintenance dredging, ecological restoration, and low‑carbon dredging.
Based on various forecasts, Brent crude prices are likely to remain in the US$85–100 per barrel range in the first half of 2026, with a significant geopolitical premium. Goldman Sachs has raised its Q4 2026 Brent forecast to US$80 per barrel. If the conflict eases in the second half of the year, prices could fall back to US$75–85 per barrel, but the long‑term price centre is expected to be above the pre‑conflict level of US$60–70 per barrel.
For the waterway engineering industry, high oil prices are evolving from a short‑term shock to a medium‑term operating environment variable. Enterprises need to restructure their cost models, accelerate green equipment substitution, and strengthen supply chain resilience to remain competitive in this “high‑energy, high‑cost” new normal. Short‑term pain is inevitable, but in the long run, this round of oil price shocks may drive deeper technological upgrading and profit‑model optimisation within the industry.
(Data sources: Reuters, Goldman Sachs, China National Development and Reform Commission, Millionbce.com, China Securities Journal, Longzhong Information, Baltic Exchange, Shanghai Shipping Exchange, Lloyd’s List Intelligence)
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