Recent hostilities in the Red Sea have thrown global shippers of vital goods for a loop – but it is hardly the only issue that big carriers are facing as 2024 kicks off.
Significant disruptions
Giants like Maersk (MAERSKb.CO) say the industry, which handles 90% of global trade, faces the possibility of significant disruptions, from ongoing wars to droughts affecting key routes like the Panama Canal.
That will increase delays and raise costs for retailers like Walmart (WMT.N), IKEA and Amazon (AMZN.O), as well as food makers such as Nestle (NESN.S) and grocers including Lidl.
“This is seemingly the new normal – these waves of chaos that seem to rise and fall. Before you get back to some level of normalcy another event happens that sort of throws things out of whack,” said Jay Foreman, CEO of Florida-based Basic Fun, who sends toys from factories in China to Europe and the United States.
Added 2024 risks include a possible expansion of Red Sea attacks to the Arabian Gulf, which could affect oil shipments, and further souring of China-Taiwan relations that could also affect important trade lanes.
Maersk on Friday joined other major ocean carriers in rerouting ships away from the Red Sea to avoid missile and drone attacks in an area that leads to the vital Asia-Europe Suez Canal shortcut. That route handles more than 10% of total ocean shipments and nearly one-third of the world’s container trade.
While tankers carrying oil and fuel supplies for Europe continue to pass through the Suez Canal, most container ships are rerouting goods around Africa’s southern tip as Yemeni Houthis attack vessels in the Red Sea in a show of support for Palestinian Islamist group Hamas fighting Israel in Gaza.
Lower water levels
Crossings through the Panama Canal, a Suez Canal alternative, are down 33% due to lower water levels, according to supply chain software provider project44. Such restrictions helped send dry bulk shipping costs for commodities like wheat, soybeans, iron ore, coal and fertilizer sharply higher in late 2023.
Increasingly frequent severe weather events are having a more immediate effect than political tensions. Brazil suffered a double-whammy of a historic drought on the Amazon and excessive rains in the north of the country that contributed to a longer-than-usual ship queue at the port of Paranagua in late 2023 just months ahead of peak soybean shipping season.
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Source : Reuters
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