Chinese Cargo Ships Navigate Arctic Northern Sea Route as Alternative to Red Sea

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Chinese Cargo Ships Navigate Arctic Northern Sea Route as Alternative to Red Sea

August 12th, 2024 Tim Jay Leave a comment

Chinese general cargo vessels have started exploring a new route to bypass the Red Sea, opting for the Arctic Northern Sea Route (NSR).

New New Shipping’s vessels, Xin Xin Hai 1 and Xin Xin Hai, have embarked on a voyage through the thawing NSR, made accessible with the help of icebreakers during the summer months.

According to scientists, climate change and melting ice sheets could soon render this Arctic passage navigable year-round. The route offers a shorter journey of approximately 13,000 kilometers from China to Northern Europe, significantly reducing the 20,000-kilometer voyage through the Suez Canal and slashing the distance needed to navigate around the Cape of Good Hope by nearly half.

The shorter route could provide shipping lines with a competitive edge, potentially challenging faster transport modes. However, Arctic navigation remains complex, especially for container vessels. Ships traversing this route will require ice-strengthened hulls to withstand encounters with small floating ice formations, even when following in the wake of an icebreaker.

European shipping lines also face the dilemma of navigating the political sensitivities surrounding the NSR. The route is heavily reliant on Russian search-and-rescue (SAR) capabilities and is set to benefit from a $7.7 billion investment by the Russian government. Russian premier Vladimir Putin remarked early last year, “Whether this is good or bad, it is happening – the Northern Sea Route is opening up.”

The Trans-Siberian Railway, which facilitates Chinese trains traveling to Europe via Russian-installed tracks, has already demonstrated that practical considerations can sometimes outweigh political concerns. Whether this approach will extend to the shipping industry remains uncertain.

While climate activists may be uneasy about increased maritime activity in the fragile Arctic region, the reduced fuel consumption and CO2 emissions from shorter transits could play a crucial role in the broader efforts to decarbonize cargo transport.

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Maersk Predicts Prolonged Trade Disruptions into 2024 Amid Red Sea Conflict

August 2nd, 2024 Tim Jay Leave a comment

Global trade disruptions caused by the ongoing conflict in the Red Sea are anticipated to persist throughout 2024, according to A.P. Moller-Maersk A/S, a key indicator of global trade health. This statement coincided with Maersk’s third consecutive financial guidance upgrade within three months, driven by rising freight rates bolstering the company’s profits.

On August 1, Maersk adjusted its forecast for underlying earnings before interest, tax, depreciation, and amortization to a range of $9 billion to $11 billion for this year, up from the previous estimate of $7 billion to $9 billion. Analysts had predicted an average of $8.76 billion, based on Bloomberg’s compiled estimates.

The Danish shipping giant had previously increased its annual profit outlook in May and June, citing greater-than-expected impacts of Red Sea congestion on global supply lines. Maersk now projects this disruption to extend at least until the end of 2024.

Attacks by Houthis have rendered the Suez Canal unsafe, leading to a significant 77% reduction in container ship traffic through the vital route compared to the previous year, according to Bloomberg Intelligence. Consequently, ships are rerouting around Africa, increasing vessel capacity requirements and elevating freight rates amidst a post-pandemic market slump with an oversupply of ships.

Maersk highlighted ongoing high volatility in trading conditions due to the unpredictability of the Red Sea situation and uncertain supply-demand dynamics in the fourth quarter.

The company also revised its 2024 global container trade growth forecast to 4% to 6%, up from the previous upper range of 2.5% to 4.5%. Additionally, Maersk now expects free cash flow in 2024 to be at least $2 billion, doubling the earlier projection of at least $1 billion.

Despite an initial 4.2% rise in Maersk shares in Copenhagen, they later traded 0.7% lower by 3:06 p.m. local time. Brian Godsk Borsting, chief analyst at Danske Bank Credit Research, noted that the strong rise in container freight rates in recent months made the guidance upgrade somewhat anticipated.

Maersk also released preliminary second-quarter revenue and profit figures ahead of the full report due on August 7, which fell short of average analyst estimates.

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Large International Exhibitor Contingent Showcased Some Interesting New Products at New York Fancy Food Show, Discussed Red Sea Turmoil

July 24th, 2024 Manik Mehta Leave a comment

Though the array of food products, including many new culinary creations, showcased at the recent Fancy Food Show in New York was appealing, the large turnout of exhibitors and visitors, particularly from countries in Asia, also discussed in private conversations the effects of the Red Sea turmoil on exports resulting from higher freight costs and longer delivery times.

There were over 2,300 exhibitors from 56 countries spread across 29 international pavilions representing Africa, Europe, North America, South America, and the Oceana region. Spain was this year’s “partner country”, but there were also very large exhibitor contingents from Italy, Portugal, Tunisia, Morocco, etc.

The Specialty Food Association (SFA) which organizes the food show, is keen to enhance international participation so that” foreign buyers can establish business with U.S. importers and also U.S, companies can interact with foreign buyers at the show”, according to SFA spokesperson.

Dakir Berrada, the founer/owner of Noor Fes, an olive oil-production company in Fes, Morocco, told the Global Trade that this facility produces organic premium extra virgin olive oil, using fine Moroccan picholine olives grown on the company-owned farm.

“Our picholine olive oil varieties have won awards at international olive oil competitions. We have been exporting to Belgium, Scandinavia, etc. but in the U.S. our products are being launched at the Wholefoods with its wide network of some 400 stores in the U.S.,” he said. “Our organic extra virgin olive oil was one of the five best olive oils chosen at the New York Fancy Food Show in 2023. Indeed, we like to call our product olive juice rather than olive oil. Our U.S. office is located in Delaware.”

Trying to explain the sharp rise in olive oil prices, Berrada said: “… prices of other edible oils have risen higher. Extreme temperatures have affected olive crops in the past two years. But consumers do understand …” he said, adding that there are two kinds of olive oil found in the U.S. market, one being the generic kind, a blending which is of average quality, while the other one is of a higher quality and commanding a higher price. “Our product is of higher quality … it is FDA certified and is organic. Since we have an economy of scale, our prices are competitive. Thanks to our U.S. distribution office, the buyer can get shipment almost immediately. The Red Sea turmoil does not affect our shipments since we ship directly from Casablanca in Morocco to our customers in Europe and North America. The value of our exports is about US$ 15 million to 20 million,” he said.

Turkey’s large exhibitor contingent showcased various products, including olive oil. Fatih Avan, Assistant General Manager of Verde Yag Besin, an Izmir-based olive-oil company which has been participating at the NYFFS since 2000, observed: “North America is an important region for international olive-oil producers. This year we hope to increase our global exports to US$ 200 million, up from last year’s US$ 120 million … we export to 55 countries, including the U.S.,”

But Bekir Sari, Verde’s export sales and marketing director, noted that shipment time to the Far East had doubled – from 35 to 75 days, requiring vessels to sail round the Cape of Good Hope. Freight costs have doubled, in some case, even tripled. The U.S. market is the fastest growing market for olive oil. His company is considering setting up a plant in the U.S. because “North America is overall a promising region inherent with growth potential. Being an important part of a healthy diet, olive oil’s nutritional properties appeal to the increasingly health-conscious American consumer,” Sari said.

But one novel food item – chocolates made of camel milk – could become visible on the shelves of all U.S. mainstream supermarkets and specialized stores, as some pundits are predicting. Al Nassma Chocolate LLC, based in Dubai, has been trying to penetrate the world markets, highlighting camel milk as rich in nutrients.

Al Nassma, which showcased its range of camel-milk chocolates at the NYFFS, is a joint venture between the Dubai Government and Austrians and Germans, said that camel-milk chocolates are known around the world. In an interview with Global Trade, the company’s general manager Martin van Almsick said that camel’s milk is already available in supermarkets in the same way as cow’s milk is.

“Camel’s milk is low in fact but high in minerals … Al Nassma produces about 100 tons of chocolates a year … since 2009 we’ve been exporting to Japan, Europe, etc. We see considerable interest on the part of buyers, retailers, importers, etc. We import cocoa beans from Togo and other African countries. Dates are already in big demand in the U.S. and acquire added nutritional value in camel-milk chocolate,” van Almsick explained.

There are camel dairy colonies in the Middle East, including Camelicious in Dubai and the Al Ain Farms in the Abu Dhabi, the UAE capital.

Southeast Asian exhibitors also showcased a variety of products, including coffee, candy, organic sugar, ginger candy, etc. Indonesia’s trade attache in Washington DC, Ranitya (Adis) Kusuma Dewi, told Global Trade that Indonesia’s food exports to the U.S. amounted to $ 5 billion of the total exports of $ 28 billion last year, with food exports up 20% over 2022. “Our coffee is of many varieties, depending on where it is grown … we have received some good business responses,” she said.

Datuk Aria Putera Ismail, the CEO/Group President of Malaysia-based SME Bank Group, a state-owned bank promoting the SME sector, with funding from the Ministry of Entrepreneur and Cooperative Development, explained: “We provide SMEs training and financial services … the funding is used to explore new markets … our 11 SME exhibitors at the show produce snacks, beverages, spices, etc. The exhibitors have received business enquiries at the show,” he said.

But he said that some of the prices of products exported had risen sharply, also because of longer shipping schedules.

The products of Julie’s Mfg. Sdn. Bhd., a leading Malaysian biscuit company, which was independently participating at the show, are already marketed in many Asian ethnic supermarkets, but as Martin Aang, director, said he was trying to market under Julie’s brand in the mainstream supermarkets, many of which sell his products under U.S. brand names. “We had a good last year but freight costs rose sharply due to longer shipping routes,” he said. Julie’s, with $ 100 million turnover, exports to over 90 countries.

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Container Rates Surge Amid The Red Sea Crisis

May 15th, 2024 Container xChange Leave a comment

In response to the escalating Red Sea crisis, leading online container logistics platform Container xChange released a comprehensive report detailing the far-reaching effects on container trading and leasing rates worldwide. The report explores the intricate dynamics of the crisis, shedding light on the unprecedented surge in container prices and leasing rates, as well as the ripple effect on global trade routes.

1. IMPACT OF RED SEA ATTACKS ON CONTAINER PRICES

As container vessels take longer routes, capacity constraints contribute to a revival in container rates. The China-to-Europe trade lane has witnessed significant surges, with trading spot rates soaring in key Chinese ports. The disruptions are not confined to China; leasing rates bound for Hamburg, Germany, have doubled since Jan 1.

To provide context on the current state of average container prices in Shanghai, China, in comparison to the peak demand period during the COVID-19 pandemic (2021), we present a chart illustrating the price trends from 2020 to Jan. 29, 2024. The container prices skyrocketed to historic levels in 2021 due to the pent-up demand post COVID, reaching a peak of $6,171 in the last week of September 2021, and falling since then until December 2023 (keeping aside minor seasonal hikes). However, container prices have experienced a significant increase since the beginning of January 2024.

Weekly China-Europe Trading spot rates continue to shoot up: Trading spot rates for 40-foot-high cube cargo-worthy containers have witnessed a significant surge in key Chinese ports. Noticeable week-on-week increases have been recorded in Xiamen (23%), Shekou (19%), Guangzhou (10%), Huangpu (8%), and Nansha (8%). These disruptions are not confined to China; leasing rates bound for Hamburg have doubled since Jan. 1.

“Since the beginning of the Houthi situation, the trading prices for 40-foot-high cube units in China significantly increased because there is expected tightness around equipment availability in Chinese main ports ahead of Chinese New Year because the loop around Africa soaks up capacity and delays the return of empty equipment to China,” commented Christian Roeloffs, cofounder and CEO of Container xChange.

“At present, there is still surplus in the market. However, the challenge lies in securing space on vessels, and the PUCs (pickup charges) are considerably high. The suppliers are hesitant to reposition their containers to locations with elevated storage fees, and if they do, they often seek to offset these costs by demanding higher PUC.”

A Container xChange customer from India added, “Storage charges in India are inexpensive. Consequently, some NVOCC [non-vessel operating common carriers] opt to utilize containers from other companies rather than moving their own.”

Container xChange’s research indicates a global impact on container trading prices, with the top 10 locations experiencing substantial month-on-month percentage increases. European ports like Le Havre, France, and Duisburg, Germany, witnessed significant decreases, while ports in North America showed mixed results. Meanwhile, Asian ports, including Shanghai, China, and Xiamen, China, saw an increase in average container prices, indicating adaptation to disruptions.

Shown above are the top 10 locations with biggest percentage increase in average monthly container prices across the world.

There are varying degrees of impact on container prices across different regions. Some regions experienced a decrease in prices, while others saw an increase.

2. CONTAINER LEASING RATES CONTINUE TO RISE

Container leasing spot rates have mirrored the spikes observed in trading prices, especially in the China-to-Europe route. Rates have steadily increased, reaching notable highs. The expected continuation of disruptions indicates a prolonged period of challenges, requiring industries to adapt to structural imbalances in supply and demand.

“We’ve witnessed a continuous surge in leasing rates since around August-September 2023, starting at a low of approximately $200 for a one-way move from Ningbo or Shanghai to Hamburg, often referred to as pickup charges,” says Roeloffs.

“This escalation is primarily driven by two key factors. Firstly, the widening price gap in trading prices has played a pivotal role, and secondly, there’s a notable equipment scarcity across China. As the price gap widens and equipment availability tightens, the spike has become more evident since the beginning of 2024. It’s clear that the attacks in the Red Sea are not merely a passing phenomenon; they have substantial implications on the routing of container vessels, causing delays in their return trips to China. We have witnessed this surge to top at $800 for a one-way move, marking a fourfold increase.”

The Container xChange co-founder and CEO continues, “We do expect that after Chinese New Year the situation will decelerate and ease up owing to the drop in demand, carriers will be able to reconfigure their network and adjust to the longer transit times around the cape of good hope and are supposed to have a structural supply demand imbalance with a significance supply overhang.”

He concludes, “The situation is expected to persist for a longer than expected period of time and hence, we will probably have to live with this for a long time.”

Top trade routes with highest month-on-month rate hikes: In the period from Jan. 1-30, 2024, leasing rates for routes bound to Hamburg showed a substantial increase. For example, Qingdao to Hamburg rates surged from $260 on Jan. 1 to $1,060 by Jan. 30. Similarly, Shenzhen to Hamburg rates rose from $500 on Jan. 1 to $750 by Jan. 30. These figures highlight a significant upward trend in leasing rates during the specified timeframe, illustrating the impactful changes in the market.

Below is the list of the highest spikes noticed month on month from December 2023 to January 2024 across trade routes. The prices are the average leasing terms for SOCs (shipper owned containers) as observed on the Insights platform of Container xChange.

European ports experience substantial increases: Routes connecting Shanghai to European ports, such as Le Havre, Budapest, and Munich, witnessed some of the highest percentage increases. Le Havre recorded an extraordinary surge of 323.08%. This indicates potential challenges in the European supply chain, possibly due to the longer alternative route and increased shipping costs.

Impact on trans-Pacific routes: Routes to the West Coast of the United States, including Oakland, Los Angeles, and Long Beach, all in California, experienced notable increases (ranging from 30.94% to 51.71%). The rise in leasing rates suggests that vessels rerouting around the Cape of Good Hope are facing higher costs, potentially due to increased travel distances and fuel consumption.

Significant impact on transatlantic routes: Routes connecting Shanghai to key North American cities like New York, New York, and Cleveland, Ohio, witnessed considerable percentage increases. This indicates that the disruption is affecting the traditional transatlantic trade routes, with potential repercussions for industries relying on timely deliveries between Asia and North America.

Mixed impact on Asian routes: While routes to Chennai, India, experienced a substantial increase (73.33%), routes to Minsk, Belarus, showed a comparatively lower percentage rise (19.17%). This suggests variations in how disruptions affect different regions, possibly influenced by the nature of trade and supply chain dynamics.

3. INDUSTRIES IMPACTED BY RED SEA TURMOIL

The longer disruptions at the Red Sea trade route pose a significant threat to various industries, including automobiles, electronics, chemicals, consumer goods, machinery, and pharmaceuticals. Delays in the supply chain could lead to production interruptions, impacting global value chains.

“Effectively navigating this critical period requires enhanced predictive analysis, meticulous demand forecasting, and increased collaboration within the industry,” says Roeloffs. “By employing advanced planning techniques and maintaining agility in response to evolving situations, the manufacturing sector can not only overcome immediate challenges but also strategically position itself for long-term success. Adapting to the new normal will involve holding increased inventory, accounting for extended transit times, and acknowledging higher container rates as integral components of the evolving landscape.”

The impact extends beyond individual industries to the broader economy, emphasizing the vulnerability of just-in-time manufacturing processes to disruptions. Businesses across sectors will need to closely monitor and adapt to evolving circumstances to ensure the continued flow of goods through alternative routes if necessary.

A remarkably positive outlook on container price development: In January, the Container Price Sentiment Index (xCPSI), a proprietary container price sentiment tool by Container xChange, consistently maintained historically elevated levels, reflecting a widespread belief that container prices would continue to soar due to the ongoing Red Sea crisis. The industry anticipates sustained high prices, highlighting the profound impact of the crisis on global trade.

The industry’s expectation for container prices to remain exceptionally high in the foreseeable future urges businesses to stay agile and vigilant in their planning amidst evolving global trade dynamics.

The Container Price Sentiment Index (xCPSI) serves as a valuable metric for assessing the prevailing market sentiments among supply chain professionals on the anticipated trajectory of container prices in the upcoming weeks.

Container xChange serves as a global online platform facilitating container leasing and trading, connecting container users with owners. The platform streamlines the process of finding and exchanging containers, optimizing fleet management, and fostering collaboration across the shipping industry. Currently, 1,500+ vetted container logistics companies trust xChange with their business.

Global Logistics, Global Trade Daily, International Trade

Navigating the Long-Term Consequences of the Red Sea Crisis for Retailers

May 15th, 2024 Emily Newton Leave a comment

Retail supply chains are no strangers to disruption — especially since the COVID-19 pandemic — but the current Red Sea crisis has escalated things. As Houthi rebel groups continue to attack ships crossing these waters, many retailers are having to rethink their near and long-term supply chain strategies.

The Houthis have attacked dozens of ships in the Red Sea since November, when they hijacked a vessel in response to the ongoing war in the Gaza Strip. Many of these cases have resulted in material damage. As this trend continues, its long-term impact on retailers and their supply chains will keep growing.

How the Red Sea Crisis Affects Retail Supply Chains

The Red Sea plays a crucial role in many retailer’s supply chains, even those that don’t source directly from the Middle East. As the fastest maritime route between Europe and Asia, the Suez Canal sees more than 20,000 ships pass through each year. These vessels represent a considerable chunk of global trade and their total cargo is worth billions — if not trillions — of dollars.

Given that importance, retailers face an uncomfortable choice when confronting the rebel attacks in the Red Sea. Letting ships pass through as normal could endanger crews and put their cargo in jeopardy. Understandably, most have opted to avoid these waters in response, but this comes with challenges, too.

The most straightforward alternative to passing through the Suez Canal is going around the Cape of Good Hope along Africa’s southernmost coast. While currently safer, this route takes 10-14 days longer than going through the Red Sea. It also brings abnormally high traffic to South African ports, creating the potential for further delays and costs.

On a larger scale, the Red Sea crisis highlights the fragility of global supply chains. Retailers thousands of miles away from the Middle East must grapple with disruption from a conflict they and their suppliers have little to no involvement in. It’s the latest in a series of events since the COVID-19 pandemic to emphasize how unpredictable and sensitive current sourcing and shipping practices are.

Temporary Fixes

Retailers have taken varied measures in response to this ongoing crisis. Some, like IKEA, have embraced longer lead times from rerouting shipments around the Cape of Good Hope. In light of how unexpected delays can lead to a loss of customer loyalty, they’ve informed customers upfront that some products may take longer to ship or face limited availability.

Other retailers have opted to ship products by air instead of switching to a longer sea route. While this strategy prevents delays, it’s far more expensive. As demand for air cargo rises, rates could go up, too — leading to even higher costs. Retailers may have to pass on these price hikes to customers or temporarily accept a smaller profit margin as a result.

Some businesses have embraced a hybrid strategy, recognizing that neither side alone is ideal. Delays can impact consumer confidence, but air freight is too expensive to justify for all products. Shipping high-value or time-sensitive items by air and using longer sea routes for the rest may offer a more comfortable balance.

A Move Toward Diversification

Of course, all three of these strategies are only temporary fixes. Viewing this crisis as the latest in a growing pattern of disruptions highlights the importance of more long-term solutions. For many, these adjustments start with supplier diversification.

Reliance on a single supplier or even one part of the world makes retailers more prone to issues like the current Red Sea situation. These events wouldn’t be so disruptive if this one route didn’t account for so much of some company’s supply. Sourcing from a more geographically diverse set of partners is more expensive upfront, but it mitigates these crises when they arise.

Previous studies suggest diversification can cut potential losses in half when supply chain disruptions arise. Strategies built around that idea do assume that these unexpected events will happen — they don’t pay off unless they do. However, considering how many of these situations have arisen in the past few years alone, that’s a reasonably safe bet for many retailers.

Emphasis on Transparency

Any effective diversification strategy also needs to emphasize supply chain transparency. This is often a struggling point for retailers. Many businesses lack full visibility into their on-hand inventory, much less over what their broader supply chain looks like.

Bridging that gap will require investment in new technologies. Multi-tier digital inventory systems and Internet of Things (IoT) tracking solutions ensure businesses create the most efficient supply chains by providing a complete view of them. Having real-time data across the supply chain makes it easier to see where potential disruption-prone processes lie.

Once retailers recognize their weak points, they can take measures to prevent extremes like the Red Sea crisis. Because conditions can change quickly, these strategies must continually review real-time supply chain data to ensure long-term resilience.

Planning for Future Disruption

Similarly, the Houthi attacks will likely spur further investment in scenario modeling. Disruptions have become too common for retailers to not include their likelihood in long-term planning. Even before this current crisis, freight rates rose nearly 10 times over after the onset of COVID-19. The only way to minimize the damage is to plan for likely disruptive events like this in the future.

Retailers can’t predict everything, but they can review their supply chains to see what kinds of disruptions are more likely than others. Then, they can use tools like AI and digital twins to determine the best way to prepare for them.

For some companies, this may look like switching to a supplier further away from the coast to minimize the threat of extreme weather. For others, it could mean reshoring to shorten travel distances and reduce touchpoints for supply chain fraud to occur. Whatever the details, case-specific scenario modeling will make retailers more resilient.

The Red Sea Crisis Could Reshape Retail Supply Chains

It’s difficult to predict how long the current Red Sea situation will last and what its total economic toll will be. What is certain, though, is that retail supply chains can’t continue the way they have if they hope to avoid similar situations in the future.

The Red Sea crisis will serve as a wake-up call for some retailers. Disruptions like this signify it’s time to embrace a more resilient long-term supply chain strategy, even if that means higher upfront costs.

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Renewed Piracy Menace Endangers Red Sea Shipping Routes

May 10th, 2024 Tim Jay Leave a comment

The resurgence of piracy in the Red Sea and the Horn of Africa poses a grave threat to maritime security, with recent attacks by Somali pirates sparking renewed concerns for international trade and the safety of crew members. Exploiting the diversion of naval forces’ attention towards the Houthi crisis, Somali pirates have resurfaced, casting a shadow of fear and instability over the region.

The “Abdullah” Incident: A Grim Reminder

In a harrowing incident off the coast of Mogadishu, the 58,000-ton cargo ship “Abdullah” fell prey to pirate aggression. Pirates boarded the vessel, subjecting the 20-man crew to threats of violence unless their ransom demands were met. Audio messages from crew members to their families paint a chilling picture of the ordeal. Lacking private armed guards and evasive tactics, “Abdullah” was an easy target, highlighting the vulnerability of ships traversing these waters. Regrettably, the “Abdullah” incident is not an isolated occurrence. The Maritime Safety Centre in the Horn of Africa (MSCHOA) has reported six confirmed piracy cases and three attempted attacks in recent months. While tankers like “Central Park” and “Ruen” were eventually released following intervention by US and Indian forces, others like “Lila Norfolk” and “Waimea” faced off piracy attempts with exchanged gunfire.

Urgent Measures Needed

With naval resources stretched thin by the Houthi crisis, the onus falls on ship owners and managers to bolster security measures. Ambrey, a security company, underscores the vulnerability of vessels like “Abdullah” due to inadequate safeguards. The absence of private armed guards, evasive maneuvers, and deterrents like barbed wire or water hoses renders ships easy prey for pirates. Despite the perilous situation, the crew of “Abdullah” remains safe, with Meherul Karim, Managing Director of SR Shipping, affirming relentless efforts to negotiate for their swift and secure release.

A History of Persistent Threat

Piracy in the Red Sea and Horn of Africa region is a longstanding menace. Somalia’s political instability and maritime policing shortcomings have long provided fertile ground for pirate activities. The 2000s witnessed a surge in piracy, with Somali pirates orchestrating numerous attacks, resulting in the kidnapping of sailors and hijacking of ships.

International Response and Ongoing Challenges

The international community responded robustly to the piracy surge, deploying multinational naval forces and implementing stringent security protocols. While initial efforts yielded significant reductions in piracy incidents, recent years have seen a troubling resurgence, with 2023 recording 120 reported cases.

Coordinated Action for Sustained Vigilance

Piracy remains a persistent threat, underscoring the imperative for continuous vigilance and collaboration across all stakeholders. Governments, international bodies, shipowners, and managers must work in concert to counter piracy effectively, bolster maritime policing, enhance security measures, and address underlying issues such as poverty and instability. Embracing technological advancements can further fortify efforts to safeguard shipping routes and protect crew members.

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Maersk Adjusts Surcharges Amid Escalating Red Sea Risks

May 8th, 2024 Tim Jay Leave a comment

Recent developments in the Red Sea have prompted Maersk Line to implement surcharge adjustments and reroute vessels, signaling heightened concerns for maritime security and operational costs.

Abdul Malik Al-Houthi’s announcement of escalated operations in the Red Sea has raised alarms, with Maersk Line noting an expansion of the “risk zone” and increased attacks reaching further offshore. As a response, Maersk has revised its peak season surcharge on the Asia-North Europe route, tripling it from $250 per TEU to $750 per TEU starting from May 11th.

The situation in the Red Sea has already led to a significant loss of capacity for Maersk, estimated at between 15% and 20%. This loss, coupled with a 13% drop in revenues in Q1, has compelled the Danish carrier to reroute vessels around the Cape of Good Hope for the foreseeable future. While this measure prioritizes the safety of crew, vessels, and cargo, it incurs additional time and costs for cargo delivery.

The entry of Iranian military personnel into the Red Sea theatre, exemplified by the recent hijacking of MSC Aries, has further complicated matters. Maersk has highlighted the knock-on effects of this situation, including bottlenecks, vessel bunching, delays, and shortages in equipment and capacity.

Israel’s recent attack on an Iranian airbase, in response to an earlier Iranian airstrike, has added another layer of tension to the region. While Minister Miri Regev asserts that Israel’s message was received, security experts like Hans Tino Hansen of Risk Intelligence evaluate the Houthi and Iranian threat cautiously. While the Houthis could potentially expand their reach with Iranian support, such actions may incur diplomatic consequences, particularly against US and UK-related vessels.

Maersk emphasizes that diversion around the Cape of Good Hope increases fuel consumption by 40% per ship, hinting at possible future alterations to surcharges to offset these additional costs. Regular review of surcharges is assured to keep customers informed of any changes.

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Maersk Warns of Continued Red Sea Disruptions, Affecting Global Shipping Capacity

May 7th, 2024 Tim Jay Leave a comment

A. P. Moller Maersk, a leading container shipping company, has issued a stark warning about the ongoing disruptions in the Red Sea, indicating significant repercussions for the industry’s capacity in the second quarter.

Recent attacks by Iran-aligned Houthi militants have escalated tensions in the region, prompting Maersk to project a notable reduction of shipping capacity between the Far East and Europe by 15%-20% in the coming months. These disruptions force vessels to take longer routes, resulting in increased voyage times and freight rates.

Since December, Maersk and other shipping companies have rerouted vessels around Africa’s Cape of Good Hope to circumvent the risk zone in the Red Sea. However, the expanded threat area and persistent attacks have extended journey times, amplifying costs and logistical challenges.

Maersk anticipates that these disruptions will persist until the year’s end, leading to bottlenecks, vessel congestion, and shortages of equipment and capacity. In response, the company is implementing measures to enhance reliability, including faster sailing and the addition of capacity, with over 125,000 additional containers already leased.

The ongoing disruptions in the Red Sea are part of a broader geopolitical context, with tensions in the region heightened by recent strikes targeting Iran’s nuclear facilities. Despite efforts to safeguard shipping lanes, the continued disruptions underscore the profound impact on global trade and shipping operations.

As the industry navigates these challenges, Maersk’s warning serves as a reminder of the complex interplay between geopolitical tensions and maritime commerce, highlighting the urgent need for strategic solutions to ensure the stability and resilience of global supply chains.

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Schedule Reliability Shows Gradual Improvement Amid Red Sea Crisis

May 3rd, 2024 Tim Jay Leave a comment

Amidst the challenges posed by the Red Sea crisis, there are encouraging signs of progress in global schedule reliability, as highlighted by Sea-Intelligence’s latest findings. The March 2024 statistics reveal a notable uptick of 1.6 percentage points month-over-month (MoM), reaching 54.6 percent.

Issue 152 of the Global Liner Performance (GLP) report by the maritime data company presents comprehensive data on schedule reliability, encompassing 34 trade routes and over 60 carriers. Despite a year-over-year (YoY) decline of -7.9 percentage points, the average delay for late vessel arrivals saw improvement, decreasing by -0.52 days MoM to 5.03 days, compared to pre-crisis levels from November 2023.

Among the top 13 carriers, Wan Hai emerged as the most reliable in March 2024, boasting a schedule reliability of 59.7 percent. Hapag-Lloyd and ZIM closely followed, with schedule dependability rates of 56.1 percent each. Notably, 11 out of the top 13 carriers witnessed MoM improvements in schedule reliability, with Wan Hai leading the pack with an impressive increase of 11.1 percentage points.

However, challenges persist, as reflected in the year-over-year comparisons. None of the 13 carriers showed gains in schedule reliability compared to the previous year, with PIL experiencing the most significant decrease of -18.1 percentage points. Despite this, there is a sense of cautious optimism as the industry moves forward.

In February, Sea-Intelligence reported a similar trend, with global schedule reliability witnessing a 1.7 percentage point MoM increase to 53.3 percent. These incremental improvements underscore the resilience of the industry amidst ongoing disruptions, offering hope for continued progress in the face of adversity.

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Navigating Global Economic Challenges: UN Report Highlights Concerns and Calls for Multilateral Action

April 16th, 2024 Tim Jay Leave a comment

Amidst ongoing economic uncertainties, the latest report from the United Nations Trade and Development (UNCTAD) warns of potential further deceleration in global economic growth and trade disruptions in 2024. Secretary-General Rebeca Grynspan emphasizes the need for coordinated multilateral action to address shifting trade patterns, escalating debt, and the mounting costs of climate change, particularly impacting developing countries.

While expectations for lower interest rates offer some hope for alleviating pressure on private and public budgets worldwide, the report underscores that monetary policy alone cannot solve key global challenges. It emphasizes the necessity of balanced policy approaches, including fiscal, monetary, demand-side, and investment-boosting measures, to achieve financial sustainability, job creation, and improved income distribution.

Highlighting rising protectionism, disrupted maritime routes due to geopolitical tensions, and climate change, the report identifies threats to global trade and economic stability. Challenges such as attacks on ships in the Red Sea and disruptions in the Black Sea exacerbate existing trade disruptions, while rising protectionism and trade tensions further hinder economic growth.

The report also delves into the pressing issue of global debt architecture reform, particularly impacting developing countries facing significant debt and development challenges. It calls for the establishment of efficient multilateral frameworks to address sovereign debt issues and strengthen the global financial safety net.

Additionally, the report addresses the rising food prices affecting low-income households in developing countries, exacerbated by factors such as global commodity cycles, supply chain concentration, and stricter standards imposed by importing nations. Food insecurity remains a critical concern, with projections indicating a potential increase in chronically undernourished individuals if current market trends persist.

In conclusion, the report emphasizes the urgent need for concerted multilateral efforts to navigate the complex economic landscape, mitigate risks, and ensure sustainable development and prosperity for all.

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