Ships diverted from the Red Sea affect global trade
PORTS & SHIPPING

Ships diverted from the Red Sea affect global trade

Maximilian Hess is a principal at the political risk firm Enmetena Advisory, situated in London. Speaking during a webcast for supply-chain managers, the speaker highlighted strikes conducted from Yemen against commercial ships attempting to utilise the Suez Canal and stated that jury-rigged weapons had the power to reroute global trade. The effects on the economy are growing after the Houthis' ceaseless effort to denounce Israel's war in Gaza for almost six months. Major Asian ports are being overloaded by ships sailing around Africa's Cape of Good Hope due to their erratic timetables, which is causing shortages and pileups in certain areas. Freight charges are rising, and delivery times to the US and Europe is increasing. As the figures below demonstrate, a number of variables are to blame, including the strong US demand for commodities. However, the Red Sea diversions are mostly to blame for the most recent round of commercial unrest. Rerouting increased the average minimum transit time by 15% to northern Europe and by over 40% to the Mediterranean from Asia, according to a recent calculation by Sea-Intelligence, a maritime intelligence and advice company with headquarters in Copenhagen. In ports like Shanghai-Ningbo in China and Singapore, the ricochet effect of ships looping back to Asia is causing delays in their schedules. Because Jebel Ali is close to the Red Sea and serves as a significant trans-shipment centre for goods travelling via Dubai on both oceanic and land routes, it is also experiencing congestion in the United Arab Emirates. Singapore, home to the world?s second-biggest container port, issued a statement last week explaining how it?s experienced a significant increase in arrivals since the start of 2024, leading to an 8.8% rise in container volumes in January through April from a year earlier. Supply chain managers who pay for those services feel pressured to put orders further in advance as ships spend more time at anchor and travel longer distances. This may cause some managers to purchase more than they may need. According to Sea-Intelligence, the percentage of container ships that arrive on schedule has fallen to around 52%, reversing much of the gains made last year from pandemic-era lows of roughly 30% in early 2022. Because most ships on these routes avoid using the shortcut via the Suez Canal, delivery times are especially sluggish for products heading from China to Europe and the US East Coast. The US economy is exerting a significant draw on demand, as seen by the amount of imports via the Port of Los Angeles during the first four months of the year. An early read on May volumes through the nation?s busiest port shows the momentum is continuing, with three of the past four weeks coming in higher than year-earlier levels.

Lars Jensen, a shipping analyst and founder of Copenhagen-based Vespucci Maritime, mentioned that as more shippers initiate the peak season early, they cause a capacity shortage, which leads to increased rates. This, in turn, prompts other shippers to join the early rush, ultimately creating the congestion they had hoped to avoid. Spot shipping rates have responded to this trend by significantly increasing. Rogier Blocq, director of product development at the Amsterdam-based WorldACD, observed that air cargo rates from the Persian Gulf and South Asia into Europe had risen by almost 80% in May compared to the previous year, contrasting sharply with the average global rate increase of about 3% during the same period.

Maximilian Hess is a principal at the political risk firm Enmetena Advisory, situated in London. Speaking during a webcast for supply-chain managers, the speaker highlighted strikes conducted from Yemen against commercial ships attempting to utilise the Suez Canal and stated that jury-rigged weapons had the power to reroute global trade. The effects on the economy are growing after the Houthis' ceaseless effort to denounce Israel's war in Gaza for almost six months. Major Asian ports are being overloaded by ships sailing around Africa's Cape of Good Hope due to their erratic timetables, which is causing shortages and pileups in certain areas. Freight charges are rising, and delivery times to the US and Europe is increasing. As the figures below demonstrate, a number of variables are to blame, including the strong US demand for commodities. However, the Red Sea diversions are mostly to blame for the most recent round of commercial unrest. Rerouting increased the average minimum transit time by 15% to northern Europe and by over 40% to the Mediterranean from Asia, according to a recent calculation by Sea-Intelligence, a maritime intelligence and advice company with headquarters in Copenhagen. In ports like Shanghai-Ningbo in China and Singapore, the ricochet effect of ships looping back to Asia is causing delays in their schedules. Because Jebel Ali is close to the Red Sea and serves as a significant trans-shipment centre for goods travelling via Dubai on both oceanic and land routes, it is also experiencing congestion in the United Arab Emirates. Singapore, home to the world?s second-biggest container port, issued a statement last week explaining how it?s experienced a significant increase in arrivals since the start of 2024, leading to an 8.8% rise in container volumes in January through April from a year earlier. Supply chain managers who pay for those services feel pressured to put orders further in advance as ships spend more time at anchor and travel longer distances. This may cause some managers to purchase more than they may need. According to Sea-Intelligence, the percentage of container ships that arrive on schedule has fallen to around 52%, reversing much of the gains made last year from pandemic-era lows of roughly 30% in early 2022. Because most ships on these routes avoid using the shortcut via the Suez Canal, delivery times are especially sluggish for products heading from China to Europe and the US East Coast. The US economy is exerting a significant draw on demand, as seen by the amount of imports via the Port of Los Angeles during the first four months of the year. An early read on May volumes through the nation?s busiest port shows the momentum is continuing, with three of the past four weeks coming in higher than year-earlier levels. Lars Jensen, a shipping analyst and founder of Copenhagen-based Vespucci Maritime, mentioned that as more shippers initiate the peak season early, they cause a capacity shortage, which leads to increased rates. This, in turn, prompts other shippers to join the early rush, ultimately creating the congestion they had hoped to avoid. Spot shipping rates have responded to this trend by significantly increasing. Rogier Blocq, director of product development at the Amsterdam-based WorldACD, observed that air cargo rates from the Persian Gulf and South Asia into Europe had risen by almost 80% in May compared to the previous year, contrasting sharply with the average global rate increase of about 3% during the same period.

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