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Bangladesh Lockdown Easing

Jul 24, 2024 | , , , , ,

Peaceful protests by university students against a government job quota system favouring relatives of war veterans escalated into nationwide violence last week, resulting in over 150 deaths, communication blackouts, and curfews. Today, Bangladesh began to gradually lift the curfew imposed last Thursday, reopening offices and banks as normality slowly returns after the week-long turmoil and internet blackout.

Numerous apparel factories have resumed operations, with broadband internet connections being selectively restored in key economic zones. However, ongoing curfews remain in critical areas, continuing to challenge export activities and travel arrangements.

Over 80% of apparel factories in Chittagong have resumed operations, with hundreds more opening in Narayanganj BSCIC, Savar, Ashulia, and Gazipur. Export Processing Zone (EPZ) factories are also expected to reopen today, with the hope that all factories will be operational within days.

Following a complete internet blackout for five days, the government began restoring broadband connections from yesterday evening, prioritising financial, industrial, export-import, diplomatic, IT, and crucial service hubs. Offices, including banks, will remain open from 11:00am to3:00 pm until further notice.

Air Freight
With limited internet connectivity restored, our partners in-country can now send documents for pending shipments and those dispatched prior to the shutdown. Shipments planned from 19th July could not be moved due to the unavailability of customs documents, resulting in some shipments being stuck in the cargo village and others in warehouses. We expect improvements from Wednesday afternoon as connectivity continues to be restored.

Ocean Freight
The port has begun processing shipments manually, prioritising perishable goods and industrial raw materials. Customs have been manually approving the delivery of containers for which duties were paid before the internet blackout last Thursday night.

At around 8am yesterday, Chittagong port, with a capacity of 53,518 TEUs, had 41,620 TEUs, leaving a safety buffer of fewer than 4,000 TEUs. The government is gradually relaxing the curfew and reopening offices and banking services to contain the unrest.

We are actively working with clients affected by the evolving situation, ensuring minimal disruption to their operations. Our team remains dedicated to navigating these complex challenges and maintaining the integrity of our customers’ supply chains amid ongoing global and regional tensions.

If you have concerns about any of the issues covered here, or would like to discuss contingencies, please EMAIL our Chief Commercial Officer, Andy Smith.

CMA CGM Montmarte

Record volumes raise concerns for peak season

Jul 24, 2024 | , , , , , , , , , , , , ,

Global demand for ocean freight container shipping has surged to unprecedented levels, surpassing even the peak during the Covid pandemic and comes when available capacity is already strained due to diversions around Africa, leading to concerns that any peak season demand could be calamitous.

Chinese exports reached a record high of 6.2 million TEU in May and while there is hope that early shipments will reduce volumes during the traditional peak season in the third quarter, other factors could keep demand high. 

Nervous shippers are re-stocking and seeking to avoid potential future tariffs on imports from China, which could sustain high demand in the coming months.

Approximately 19% of US shippers and 26% of European customers are advancing their shipping schedules due to fears of supply chain disruptions.

Planned US tariff increases on goods, including electric vehicle-related materials, battery parts, and solar cells, could further elevate freight costs as exporters rush to front-load shipments. The Hong Kong Small and Medium Enterprises Association noted that many manufacturers are struggling with tighter deadlines and increased overtime pay in mainland China, jeopardising profitability.

With importing customers asking for orders to be shipped earlier than usual, Chinese manufacturers are increasingly struggling to meet the shortened schedules necessary for timely festive season deliveries. The average cost of moving a 40ft container between Asia and northern Europe has more than doubled in two months, with a roughly fivefold increase from the same period last year.

Recent spot rate indexes for sea freight have shown the smallest gains in months, with some main east-west routes seeing a pause in growth. The slowdown suggests the market might be reaching an equilibrium of supply and demand. However, it remains unclear whether this is a temporary early peak season or if demand from front-loading shippers will persist, particularly with potential US tariff increases looming.

While Asia-to-Market routes have stabilised, others continue to show week-on-week rises, with the WCI’s Shanghai-Rotterdam leg and XSI’s Asia-Europe component both increasing. Monitoring space availability closely, there are reports that vessel utilisation might be slipping, potentially making bookings easier to acquire. However, rates are expected to remain high throughout the peak season, especially for shipments ex-China.

Equipment shortages
Please be aware that we are seeing more reports from carriers that intra-Asia routes are experiencing equipment shortages, particularly out of China. This is an industry-wide issue that initially affected long-haul shipping but now has extended to intra-Asia routes. The demand for export containers in China means that carriers have to decide whether to prioritise carrying empty containers back to China or carrying laden containers to other destinations.

We are monitoring the station closely, as it could possibly push rates up, potentially cascading into the backhaul trades to Asia and regional trades.

The unprecedented demand for ocean freight and ongoing challenges in capacity and costs suggest a complex and potentially turbulent peak season ahead.

We recommend talking to us now, if you have any urgent or high-priority orders forthcoming and sharing your shipping forecasts, so that we can secure your space, on the services that meet your deadlines, at the best possible rates.

To learn how we can enhance your ocean freight solutions, please EMAIL our Chief Commercial Officer, Andy Smith. 

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Global IT outage disrupts supply chains

Jul 23, 2024 | , , , , , , , , , , , , , , , , ,

On Friday, a faulty update to Microsoft software by cyber-security firm Crowdstrike, saw global supply chain operations significantly disrupted, with the fallout expected to take weeks to fully resolve.

Thousands of flights were grounded or delayed at major air freight hubs in Europe, Asia, and North America, creating severe impacts on the complex air supply chains.

Experts warn that planes and cargo are not where they should be, leading to extended recovery times and depending on the scale of the IT failure and current market conditions, these disruptions could take much longer to resolve than the duration of the outage itself.

This situation is further exacerbated by limited airfreight capacity, with global demand increasing by 13% in June compared to 2023, with the surge in demand largely driven by traffic from China to Europe and the US, putting additional strain on already limited available capacity.

While sea port operations were less affected, initial disruptions were reported in several European container terminals, including Poland’s Baltic Hub, Felixstowe and Rotterdam. These ports have since recovered, but the main issues could lie inland with truck and rail services, potentially increasing congestion if containers cannot be moved in or out of the ports efficiently.

Some air cargo operations are gradually returning to normal, with ground handler Swissport and Lufthansa Cargo reporting only minor impacts. However, Schiphol Airport and US airlines such as Delta, United, and American Airlines faced significant disruptions, with hundreds of flights cancelled or delayed, including 700 cancellations by Delta on Monday.

While most airlines have resumed operations, residual delays are anticipated due to the sheer number of disrupted flights.

Supply chain experts are concerned about the long-term effects of the Crowdstrike outage on global deliveries. The Chartered Institute of Export & International Trade warned that the disruption could create further problems in planning and scheduling for importers, exporters, and consumers globally. Time-sensitive air freight is particularly affected, with one thousand flights cancelled worldwide, by mid-morning on Friday.

Although a fix has been deployed by Crowdstrike, the full resolution of the outage issue may take some time, as IT staff may need to access individual machines to remove the faulty update.

The fallout from the outage has once-again highlighted the vulnerability of global supply chains and as the industry works to recover, the importance of robust contingency plans and marine insurance cannot be overstated, ensuring protection against financial risks and maintaining supply chain resilience in the face of unforeseen challenges.

To learn how we can develop and support your supply chain resilience or for more information about our Marine Insurance products, please EMAIL our Chief Commercial Officer, Andy Smith.

container ship and naval escort

SECURITY UPDATE: Red Sea

Jul 22, 2024 | , , , , , , , , , , , ,

The recent sinking of the Prestige Falcon oil tanker, following a Houthi attack, marks the deadliest incident involving these strikes to date.

The vessel capsized near the Omani coastal city of Duqm, and while the Indian Navy rescued nine of the 16 crew members, one was found deceased, and six remain unaccounted for, feared to have gone down with the ship.

The Prestige Falcon, flagged under the Comoros, was targeted approximately 5 nautical miles southeast of Ras Madrakah, Oman, closer to the Persian Gulf than the typical Red Sea and Bab al-Mandeb strait attack zones. With at least 100 Houthi attacks on merchant ships so far, resulting in the deaths of four seafarers, this incident could significantly increase that toll.

These Red Sea attacks have contributed to elevated containership charter and freight rates. Industry experts predict continued Cape of Good Hope diversions until at least 2025, keeping rates high.

Recent escalations include Israel’s attack on the Hodeidah port in Yemen, following a Houthi drone strike on Tel Aviv. The method of the Houthi drone attack remains unclear, raising concerns about potential threats to shipping in the Eastern Mediterranean.

Speculation suggests the drone may have been launched with the aid of militants closer to Israel, highlighting the risk of supply chain disruptions if drones can be deployed from nearer locations or if groups like Hezbollah become involved.

The Houthi’s have already warned that they plan to expand their campaign of attacks on commercial shipping, to include vessels in the Mediterranean. While the Pentagon has stated that the US has seen no sign of the Iran-armed rebels attempting to do so yet, it has admitted to being worried about the possibility.

“The Houthis have an advanced array of weaponry and they have weapons that could reach the Mediterranean. It definitely is of concern that they have that capability.”

According to some projections, the current Houthi attack campaign will continue for at least the rest of this year, and many commercial vessels will keep avoiding the Gulf of Aden and southern Red Sea until 2025 or beyond. In fact, it could get much worse with some of the new developments this week between Israel and The Lebanon also. We will endeavour to keep you updated as frequently as news is issued and on the impact associated with your supply chain and logistics requirements.

Experts warn that until the Houthis are deprived of the weapons they are using to conduct these attacks at source, we should expect more attacks and damage to international trade.

If you have concerns or questions about the issues covered here, please EMAIL our Chief Commercial Officer, Andy Smith.

Category: Supply Chain

Sea | Supply Chain | United States

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