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The beginning of 2024 has raised concerns about a potential crisis in the International Shipping industry, reminiscent of the challenges faced during the COVID-19 pandemic. Various factors, including instability in the Red Sea, a drought affecting the Panama Canal, and industrial action at DP World, impact both containerised freight’s cost and reliability. In the last week of 2023, shipping rates surged by an unprecedented 40% within a single week, indicating significant disruptions. [1]

Geo-political issues, war & Houthi rebel attacks in the Red Sea have caused an undeniable shock to the global supply chain. Major Containerised shipping lines are now avoiding transiting the Suez Canal and instead diverting around the cape of Good Hope – adding three weeks to their transit times. With 30%[2] of Global container trade passing through the Suez, this has had significant flow on effects to all areas of shipping. Prices have been reported to have surged up to five-fold on European routes and doubled or tripled on other non-European routes. [3]

Red Sea at Aqaba in Jordan – International Shipping impacted by geo-political tensions in the Red Sea. Shipping lines diverting around Cape of Good Hope.

The Panama Canal is facing a severe drought, reducing its operational capacity. As a result, daily traffic has decreased by nearly 40% [5] compared to the previous year, with restrictions allowing only 24 vessels per day instead of the usual 36[4]. This reduction in capacity is impacting shipping lines, either causing them to divert around South America or resort to rail transport across Panama. Customers on the East Coast of America are particularly affected, experiencing increased prices and extended transit times.

Although the Asia to Oceania trade might not be directly affected by issues in the Red Sea and Panama Canal individually, combined, these areas traditionally handle a significant portion of containerised freight movements. Rerouting vessels around Africa alone reduces global containerised shipping capacity by 9% [6], leading to vessels being reallocated from Oceania and other regions. This imbalance results in price hikes and difficulties in accessing empty containers.

While Industrial action at DP World ceased at the beginning of February, the flow of effects will continue to be felt for the coming weeks and months. With a backlog of over 50,000 containers across most Australian ports and vessels out of rotation, delays can continue to be expected until this backlog is cleared. Whether related or not, the deal was reached on the same day as DP World announced prices increases of 52%[7], which will be passed on to the importer.

The hope for stability in the International Shipping Market post the Lunar New Year Holidays is tempered by continued increased transit times due to diversions around the Suez and Panama Canal. This ongoing situation will lead to sustained price and scheduling pressures. Planning ahead, allowing additional lead time, and considering increasing order sizes are advisable. Customers are encouraged to consult with their Redox representatives to devise strategies for minimising risks and addressing any shipping challenges that may arise.

 

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