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Shipping Disruptions to persist in the Near Term

Shipping Disruptions to persist in the Near Term

Dr. Raymon Krishnan, President of the Logistics & Supply Chain Management Society, expects global shipping disruption resulting from attacks on Red Sea vessels will likely persist for several months. This was one of the messages he shared at the S&P, Supply Chain Outlook 2024: Adapting to New Challenges event in Singapore in January.

In response to these attacks by Iranian-backed Houthi forces, major shipping lines have directed hundreds of commercial vessels to avoid the Red Sea, opting for the longer route around Africa.

“For shippers, this will mean longer transit times and probably disruptions of the supply chain for a few months at least, but it could also be longer because it’s so unpredictable how this situation is actually developing,” said Dr. Krishnan. “This is extremely disruptive because you have close to 20 percent of global trade that transits through the Strait. It’s one of the most important arteries of global trade and global supply chains”.

Freight rates have doubled since early December and members of the LSCMS Shippers Council are seeing war risk insurance premiums for shipments through the Red Sea also increasing. 

Speaking at the same event, Peter Tirschwell from the Journal of Commerce did go on to comment however that “With nearly all container ships now settling into their new route around the Cape of Good Hope, with few signs that routings through the Suez will resume imminently, it’s worth assessing how sizable a disruption to the container market this will be over the coming few months”. This perspective was made based on the realisation that these extended lead times will very soon become the norm and firms will make the necessary adjustments in their supply chains to adjust for this recent disruption.

There was much interest and discussion about what shipping would look like amongst the supply chain professionals who attended the event and is a small precursor for TPM2024 that takes place on March 3rd – 6th in Long Beach. 

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