Air strikes in Yemen – impacts on global shipping

Navigating the Ripple Effects: Global Shipping Challenges Amidst Air Strikes in Yemen

Freight & Trade Alliance (FTA) and the Australian Peak Shippers Association (APSA) have received the following from James Hookham, Director Global Shippers Forum (GSF), proving a reaction and expectations of the impacts following the air strikes in Yemen.

The latest event that have dramatically shifted the calculations on the Red Sea situation – while avoiding commentary on the political and military aspects, James has provided the following points as to what it could mean for shippers and supply chains reliant on this route :

1. The risks of retaliatory strikes on merchant shipping in the Red Sea area are now extreme, and all carriers can be expected to divert their ships away from the Red Sea and Suez Canal route, if they haven’t already;
2. A working assumption must be that avoidance of the Red Sea and diversions around the Cape of Good Hope will now be the rule rather than the exception, unless or until there is a political settlement which specifically includes the cessation of actions against merchant shipping in the Red Sea; 
3. Therefore, all else being equal, shippers (i.e. importers in North America and Europe) should expect a one-off adjustment to schedules and port calls over the next few weeks but after that service patterns should settle into the new longer routes and adjusted port calls, with some stability returning to predicted arrival times of ships and delivery of containers;
4. The same will apply to east-bound sailings, which may affect the availability of empty containers in Asia in the short-term. But, again, this should stabilize over time; 
5. Rates on affected trades will inevitably adjust to the higher costs incurred, bearing in mind the greater fuel burn, additional crewing time, insurance and chartering costs. But offsetting these to some extent will be the very substantial savings made in Suez Canal transit fees. These are of several hundreds of thousands of dollars for a typical container ship and these savings should be accounted for by shipping lines when justifying their surcharges and higher rates;
6. The narrative now being heard is that because the Red Sea is effectively closed to shipping, Asia-Europe/USEC shipping rates are going to repeat the sustained spike of 2020-22 (and, by implication, shipping lines will get another big profit windfall). GSF does not believe this is supported by the circumstances. There is no chronic shortage of shipping capacity in the way there was during the Covid pandemic, and there is substantial new capacity expected to be delivered throughout the first half of 2024. Demand for shipping space is also stable, if not declining;
7. Furthermore, the cost increases that will be incurred by shipping lines diverting around Africa are known and finite and should not be talked up into a second shipping crisis on the scale of the first one in 2021. Shippers should check demands for payment of additional surcharges, given that the first vessels affected by the diversion are only just arriving at their destination ports. (The first diversions commenced between 13-15 December, and not every vessel immediately diverted);
8. There have already been substantial increases in quoted spot rates on Asia Europe/USEC trades, but it is important to distinguish between rates that are quoted in hope by carriers and those that are actually being paid in cash by shippers; and
9. Shippers commencing contract renewal negotiations over the next few weeks should avoid being ‘locked-in’ to rates based on currently quoted spot prices. Following a satisfactory resolution of the situation, costs and rates on affected trades can be expected to ‘normalise’ even quicker than they did in 2022. Although it may seem a dim prospect today, this eventuality should be provided for in any agreements made with carriers for 2024-25.

The next few days are critical in whether the Red Sea situation is contained or develops into a much longer-term regional conflict, which would have much wider and profound consequences for international trade. GSF will continue to report and interpret events from a shipper’s perspective.

The recent air strikes in Yemen are reshaping global shipping dynamics, prompting a shift away from the Red Sea and Suez Canal route. Director James Hookham of the Global Shippers Forum advises shippers to brace for short-term disruptions, with vessels likely diverting around the Cape of Good Hope. While increased costs are expected, potential savings in Suez Canal fees may offset these. GSF emphasises differences from past crises, citing stable demand and upcoming capacity additions. Shippers are urged to stay vigilant as the situation unfolds, with GSF committed to providing ongoing insights from a shipper’s perspective.

Source: FTA Red Sea Media Update 4
Source: US, Britain launch new strike on Yemen’s Hodeidah: media – Chinadaily.com.cn
Source: What do Red Sea assaults mean for global trade? – BBC News

DPW MUA Protected Industrial Action

Latest on DPW MUA Protected Industrial Action

The landscape of the Protected Industrial Action (PIA) unfolding across DP World Australia terminals is characterised by its inherent fluidity, marked by a constant ebb and flow of bans, stoppages, and announcements that are subject to frequent changes and withdrawals. The negotiation table between DP World and the Maritime Union of Australia (MUA) is dominated by substantial media commentary, with particular emphasis on the 8% workers’ claim year on year for three consecutive years.

This ongoing industrial dispute is not without repercussions, as the actions taken within this context continue to exert a significant impact on the maritime industry. The operational disruptions stemming from the protected industrial actions are causing ripples throughout the supply chain, affecting port efficiency, cargo handling, and overall logistics operations.

Furthermore, IFCBAA have been in direct contact with MUA senior management and requested that they provide an update to IFCBAA on the current status of the EA negotiations with DPW.

The MUA has responded to that request by directly providing to IFCBAA the following documents which they have now provided to members and the wider industry:

• Current status of DP World EA Negotiations
• Exerts from the content ACCC’s Annual Stevedoring Report for 2022-23 (as considered relevant by the MUA to these current EA negotiations)

In the midst of these challenging circumstances, SILA remains steadfast in its commitment to keeping a vigilant eye on the evolving situation. We are dedicated to staying abreast of the latest announcements, ensuring that our valued clients receive real-time updates and insights. As a reliable partner in the industry, SILA strives to navigate these turbulent waters and provide our clients with the necessary information and support to mitigate potential disruptions and optimise their logistics strategies.

Source: FTA Industrial Action at DP World Updates
Source: IFCBAA National News # 2024/020

Chinese New Year 2024: How to maximise supply chain and logistics efficiency

Strategies for Seamless Operations: Optimising Supply Chain and Logistics During Chinese New Year 2024

As we approach the Chinese New Year, also known as the Lunar New Year or Spring Festival, it’s vital to recognise its immense cultural significance in China and across East Asian countries. This celebration, however, brings specific logistical challenges for shippers and businesses, with production slowdowns, operational limitations, disrupted schedules, and transportation delays impacting the supply chain significantly.

For businesses involved in shipping, meticulous preparation is crucial as we navigate the complexities of the Lunar New Year. Here’s a comprehensive guide to help you strategise:

1. Chinese New Year 2024 Dates:Understanding the exact dates of the Lunar New Year in 2024 is essential for effective planning.
2. Impact on Shipping and Supply Chain:Explore how the Lunar New Year festivities can affect shipping and overall supply chain operations, considering factors like limited resources and disruptions.
3. Preparation Strategies:Gain insights into preparing shipments effectively to navigate the challenges posed by Chinese New Year 2024, covering aspects from booking timelines to handling specific cargo considerations.

Anticipating the forthcoming festivities, it’s crucial for businesses to stay well-informed and strategically plan for the logistical intricacies accompanying this significant cultural celebration.

Source: Chinese New Year 2024: Planning for Supply Chain Disruptions | Maersk

Note: It takes 4-6 weeks for factories and port operations to return to normal levels after the CNY holidays.

Logistical Considerations:

Ocean Export from China: Container space is currently tighter than in previous years due to the Red Sea crisis and the Panama Canal drought. The return challenges for container ships have led to a shortage of container resources in China. The impending Chinese New Year, coupled with the Red Sea crisis, has substantially increased export pricing, with rates doubling or tripling. Carriers are exercising caution regarding shipments containing batteries, necessitating confirmation with the operations team. To secure cargo space, it is advisable to book early, at least 14 days before the preferred departure date.

Air Export from China: Similar to ocean freight, flight cancellations are expected during the holiday period, emphasizing the importance of early bookings to secure space. Resources for air exports will be in short supply. While air freight costs spiked in December due to heightened e-commerce shipments, they have returned to normal levels in January. Though a slight increase is anticipated during the Chinese New Year period, it is expected to be relatively insignificant. Operations, including pickups, may experience delays.

Imports to China: Deliveries requiring service may face delays due to a truck driver shortage during the holiday season. Providing advance notice is recommended for urgent shipments. While customs generally maintain daily staffing, certain special events may not be handled during the holiday period. Early leave by factory workers and a potential shortage of truck drivers before the Chinese New Year may impact operations. Staying vigilant and planning ahead will be key to navigating the challenges posed by imports during this time.

SILA is dedicated to assisting our clients in effectively navigating the challenges associated with the upcoming Chinese New Year and the intricate logistics it entails. Recognising the complexities of the Lunar New Year, our commitment is to offer comprehensive support and seamless solutions to ensure the continuity and efficiency of your supply chain operations during this period.

As a trusted partner, we understand the significance of meticulous planning and proactive measures in the face of potential disruptions. Our experienced team is poised to provide valuable insights, strategic guidance, and timely updates to help you make informed decisions and optimize your logistics strategies. Whether it’s addressing the limited container space in ocean exports, anticipating flight cancellations in air exports, or mitigating delays in imports to China, SILA is committed to being your reliable ally.

In the spirit of collaboration and adaptability, SILA stands ready to work closely with you, leveraging our expertise to overcome challenges and enhance the resilience of your operations. As we collectively prepare for the festive season, SILA reaffirms its commitment to delivering excellence, ensuring that your shipments move smoothly, and your supply chain remains robust. Trust us to be your partner in navigating the complexities of the Chinese New Year, providing unwavering support for a successful and seamless logistics experience.

AUSTRALIAN TRUSTED TRADER

Australian Trusted Trader reduces red tape for Trusted Traders at the border, improves certainty in export markets, and expedites the flow of their cargo in and out of Australia, which means faster access to market.

Administered by Home Affairs with the Australian Border Force, Trusted Trader is free and accredits Australian businesses with compliant trade practices and a secure supply chain. Once accredited, businesses have access to a growing range of benefits that simplify their customs processes.

SILA Global is an Australian Trusted Trader (ATT) and we encourage our clients to explore the benefits of being an ATT. If you would like to discuss this further or be guided through the process, our in-house customs broker, Nic Demo, is happy to help!

Nicoll Demo
nicoll@sila.net.au
(07) 3908 1622

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