Well, what didn’t happen in the last quarter!! Pirate attacks, wars, increases everywhere, strikes, so many weather events including more issues in the Panama Canal with water restrictions, congestion in the USA and AU, USA trucking still struggling after the collapse of Yellow Freight and more cyber-attacks.
All of this happening at a time when the global economy is meant to be quite flat, the WTO announced in late October that it had halved its forecast for growth in global trade due to factors including high-interest rates, persistent inflation, a slowing CN economy and the continued War in Ukraine and Israel. Any ongoing escalation in the wider regions of Ukraine and Israel will have significant impacts on trade, the Red Sea situation is one of many impacts that we are likely to see over the next year.
The lesson from all of this if we didn’t already learn it from COVID is that JIT shipping while seeming like an efficient strategy goes out the window with chaos, and given chaos is now a norm here, forward planning that is making room for flexibility and adaptation is a way more sensible approach in the current geopolitical climate.
Supply chains need to be robust in the way they deal with conflict, international freight price hikes because of conflicts, delays, congestion and more delays including sudden weather events. Educating the end user is even more important as it is their wrath, we all bear in times like this.
You may think it impossible to plan for these events, and whilst you’d be spot on if we were to try and pin down a specific date for each occurrence, you would be wrong in thinking you could not build the impact of these events into your supply chains. It is not enough to just simply build in CPI to pricing, it needs to reflect the origin it comes from and all the challenges those origins present. Timeframes for delivery should reflect the same the expectation that a Direct sailing arrives within a certain timeframe has pretty much gone out the window, so a more flexible approach is required.
Quick Wrap up of other regions;
Europe; Ukraine and Israel Wars, Red Sea situation which, in a double blow to importers, will increase transit times and freight costs as shipping lines route all vessels away from the Suez Canal, Introduction of CO2 emissions surcharge for all vessels calling EU Ports.
North Asia; GRI’s have been announced for January for the CNY but there is so much backlog from the DP World MUA industrial action that schedules are being disrupted. The situation at the terminals is the only thing supporting the GRI currently.
South East Asia; GRI’s have been announced on the SEA trade lane but it does remain quite stable so this may affect the quantum advertised.
North America; The Panama Canal is the driest it has been in 73 years and as a result movement through the canals is expensive. There are very limited slots available, so some carriers are choosing alternative routes through the Suez Canal, making transit times blow out more than usual. There have also been anti-mining protests affecting operations. The Panama Canal Authority introduced Reserve Slots for Nov to Feb, which severely affected the number of vessels permitted to transit. These slots are being auctioned and the winners are generally the LNG or LPG vessels where carriers are prepared to pay up to $1m for a slot.
With all of this going on carriers are switching the destination port to the West Coast as their preference hub and we all know that means congestion.
New Zealand: The fuel subsidy that was supporting the shipping sector has been revoked as of 1 January 24 so the knock-on effect with increases to NZ Fuel Surcharge for all imports and exports.
DP World Cyber Attack – Taught us all to be more vigilant in protecting ourselves against cyber threats. If DP World can be affected by the robust cyber security they have in place, we are all open to attack. Consequently, we immediately had an audit of our own protocols and are tightening up our processes to ensure we are protected above and beyond what is required.
In summary, all we can do as partners as we ride the waves together, is know that we are always here to assist in whatever you may need, be it data, analysis, coaching etc, we are open to understanding what you need and helping where possible. The world is a crazy place and the supply chain is like trying to tame chaos itself, and to tame chaos we need business friends and business partners and a lot of planning.
So planning and taming chaos is our theme for 2024! Welcome aboard!
Angela Gambell
Director
