Beyond the Bottleneck: The Worldwide Ripple of the Suez Canal Disruptions

In the interconnected world of global trade, the Suez Canal has long been a vital artery, facilitating the movement of goods between the East and West. Its importance in trade history cannot be overstated: its construction allowed ships bound for Asia to travel a much shorter route than the old one, which entailed circumnavigating the African continent.

Today the Suez Canal remains a vital link with an estimated 12% of global trade passing through it each year, including 30% of all global container traffic.

Cause of Disruption: Unravelling the Israel Conflict

Israel’s invasion of the Gaza strip, triggered by Hamas’ attacks on Israeli civilians on 7 October 2023, has been nothing short of catastrophic due to the scale of destruction and loss of lives. As the conflict continues, its effects are reverberating across the world – and trade has not been spared.

In support of Palestine, the Houthi – a Yemen-based Islamist political and military organisation – have attacked commercial ships crossing the strait of Bab al Mandeb, located between the southwestern tip of the Arabian Peninsula and the Horn of Africa. The strait is a key link in the shipping route the Suez Canal is part of; if ships cannot pass it, trade worldwide is affected.

The attacks began on 19 November 2023, when Houthi commandos landed a helicopter on the Galaxy Leader cargo vessel traversing the southern Red Sea, redirecting its course towards Hodeidah port in Yemen and apprehending the crew.

In the months since, more ships have fallen prey to attacks, with some struck by missiles or drones. Months after that first attack, the crew of the Galaxy Leader remains in captivity. On Monday 19 February, the maritime industry launched an appeal for their release.

“The 25 seafarers who make up the crew of the Galaxy Leader are innocent victims of the ongoing aggression against world shipping, and their plight is a major concern as the merchant shipping community continues to come under attack,” the statement says. “All efforts must be made by international organisations and States to secure the release of the seafarers. It is abhorrent that seafarers were seized by military forces and that they have been kept from their families and loved ones for too long. All 25 crew members of the Galaxy Leader must be released now.”

How Are Shipping Companies Responding to the Attacks?

The strait is not blocked off: a relatively small number of ships have been targeted, compared to the thousands which pass through without incident. Additionally, a campaign of joint military operations in Yemen and the Red Sea is believed to have “halved” the Houthi’s capability for further missile attacks on shipping.  However, the attacks – and the threat of more – have been enough to severely disrupt trade worldwide, as shipping companies rightfully fear for the safety of their crews.

The attacks have forced numerous shipping companies to reroute their vessels, resulting in significant delays and significant changes, as far more fuel is needed to circumnavigate Africa, and crews need to be compensated for the additional two weeks of navigation. Michelin, Tesla, BP, Shell, DHL, FedEx, Ikea, Primark, Target and Sainsbury’s are some of the most well-known companies affected – but far from the only ones.

“We’re making sure that we plan the sequencing of products from Asia Pacific so that we get products in the right order,” Simon Roberts, CEO of Sainsbury’s, said in January.

Soon after the first attacks, Mediterranean Shipping Co. (MSC) made the decision to end voyages through the Suez Canal, saying, “This disruption will impact the sailing schedules by several days of vessels booked for Suez transit. We ask for your understanding under these serious circumstances.”

MSC was the first shipping company to announce a suspension of voyages through the Suez Canal, but it wasn’t the only one. Shipping companies such as Hapag-Lloyd and CMA CGM suspended all sailings in the region soon afterwards. According to the latest data from the International Monetary Fund’s PortWatch platform, shipping volumes in the Suez Canal the week ending 13 February dropped by 55% compared to the same period a year ago. At the same time, traffic around the Cape of Good Hope rose by nearly 75%.

Simon Evenett, Founder of St. Gallen Endowment for Prosperity Through Trade, commented that while military operations have diminished the risk of attacks on commercial ships, it’s “too early” to declare victory.

“Several Western container shipping lines won’t journey through the Suez Canal. Instead, ships are being diverted round the Cape of Good Hope, adding two weeks to journeys and unnecessary expense,” he said.

Suez Canal and Cape of Good Hope: Routes, Risks, and Expenses

While the Suez Canal offers a swift transit, typically taking around 11-12 hours, the Cape of Good Hope route calls for a more extended maritime journey spanning approximately 26 days. While steering clear of canal fees, ships navigating this route grapple with heightened operational costs. Increased fuel consumption, crew wages, and maintenance expenses all contribute to the economic considerations of choosing this circumnavigation.

Additionally, the Cape of Good Hope subjects vessels to the unpredictability of harsh weather conditions, demanding additional safety precautions and potentially leading to higher insurance premiums for ships taking this alternative route.

As the maritime community grapples with the unfolding crisis, logistics teams are working tirelessly to assess the projected disruption timeframes – but it has proved to be a challenging endeavour, with disruption so closely tied to a war with no clear end in sight. The uncertainty surrounding these timelines has added an additional layer of complexity for businesses already navigating the challenges of a post-pandemic world.

Stephen Olson, Senior Adjunct Fellow, Pacific Forum International, told the World Economic Forum, “We are already seeing a wave of supply chain disruptions, some severe enough to force factory shutdowns, particularly in the automotive sector. Shipping costs have spiked, sometimes doubling or tripling, and needless to say, missiles being fired into a primary global trade route dramatically raises risk and uncertainty, which dampens business activity.

“Logistics managers are operating in crisis mode, diverting their attention from normal operations, as they try to keep multiple balls in the air. As if all of this wasn’t enough, the situation is being further exacerbated by bad luck. A primary alternative route – the Panama Canal – is being restricted due to drought conditions.

“All of these disruptions inevitably translate into higher costs. Whether they ultimately have a significant impact on global inflation will largely be a function of the duration and intensity of the attacks. Some estimates suggest that if these disruptions continue for a year, they could produce a 2% increase in goods inflation. We’ll see.”

The Impact on Businesses Worldwide

The global supply chain is a delicate ecosystem, and disruptions in one part can have a cascading effect. The Suez Canal disruptions have hit businesses around the world hard, leading to delays in manufacturing, shortages of critical components, and increased costs. From automotive to electronics, various sectors are feeling the repercussions of delayed shipments and uncertain delivery schedules.

A recent survey conducted by the British Chamber of Commerce (BCC) sheds light on the tangible impacts of the attacks on businesses in the United Kingdom. With a sample size encompassing approximately 1,000 companies, the findings reveal that a significant portion of UK exporters and manufacturers, as well as retailers, have borne the brunt of increased costs and delays attributed to the attacks. Around 55% of UK exporters as well as 53% of manufacturers and B2C service firms have reported heightened costs and delays due to the attacks.

Ryan Petersen, CEO of the U.S. supply chain management company Flexport, commented, “What’s happened right now is short-term chaos, and chaos leads to increased costs. Every ship that gets rerouted has 10,000 containers on it. It’s a lot of emails and phone calls getting made to replan each of those container journeys.”

Another concern is the transport of perishable goods which were never meant to withstand long stretches of time at sea. In these cases, shipping companies may face the loss of the entire cargo, making the entire voyage pointless in the first place – and causing untold financial losses.

Airmacs: Time-Critical and Strategic Solutions to Prolonged Shipping Timelines

As was the case with previous incidents, such as the crisis of 1956 and the Ever Given incident in 2021, the current climate shows that worldwide trade’s reliance on a relatively small number of choke points can have severe drawbacks. Whether due to incidents, to natural conditions – think of the drought which is affecting the Panama Canal – or ongoing conflict, these narrow transport routes can be easily blocked or made treacherous.

Few outside Yemen knew who the Houthi were prior to November last year, and yet they were able to put worldwide trade in a stranglehold with relatively few resources. Not all crises have a swift solution, as was the case for the Ever Given: draughts and conflicts can last a long time, and force shipping companies to find other ways to ensure their cargo is delivered on time while trying to contain the rising cost of fuel.

On the other hand, few would make long-term arrangements if there is hope of seeing the problem solved within a few short weeks. Uncertainty is precisely what makes planning so difficult. But if narrow canals and straits are easy to put into a chokehold, there is another route that’s impossible to close down: the skies.

In the era of expanding global business operations, the demand for timely deliveries has never been more crucial. Time-sensitive deliveries – the transport of goods requiring faster delivery than conventional shipping methods – are increasingly vital, even more so as world events threaten the normal flow of commerce at its most vulnerable choke points.

During all these challenges, Airmacs Aviation offers an array of strategic solutions to mitigate the impact of prolonged shipping timelines and unexpected delays.

With an extensive network of airlines at our disposal, we can organise air cargo shipments globally. Complementing this, our dedicated team of compliance and risk specialists diligently ensures strict adherence to international laws and regulations at every juncture of your shipment’s journey. Our clientele spans across a myriad of industries, encompassing government entities, humanitarian aid programs, time-critical, energy, Oil & Gas, aerospace, military, e-commerce, renewables and general cargo – amongst others.

Irrespective of whether it involves standard cargo or hazardous materials, our unwavering commitment to safety takes precedence. We implement all necessary precautions to safeguard your shipment, reflecting our dedication to secure and reliable logistics solutions.

For particularly time-sensitive deliveries, Airmacs Aviation offers a dedicated service, OBC – On Board Courier. Diverging from conventional shipping methods, Airmacs’ on-board courier services present a swifter and more secure alternative for time-sensitive cargo. On board couriers (OBCs) are specialised professionals who travel alongside the cargo, ensuring both its safety and prompt delivery. These couriers undergo rigorous vetting processes with high-level training, and boast extensive experience in handling diverse goods, particularly those of a time-sensitive nature.

By accompanying the cargo from its collection point to the customer’s doorstep, the risk of loss or misplacement is minimised, if not eradicated entirely. Throughout the entire transportation process, an On Board Courier exclusively carries and keeps the goods on their person.

Airmacs empowers businesses to navigate the uncertainties of the modern supply chain

Airmacs Aviation strategically positions its couriers worldwide, ensuring their prompt availability to depart from their hubs at a moment’s notice, equipped with all the requisite travel documents. The response time is impressive, with a courier mobilized to collect goods by hand shortly after receiving the initial request. In many cases, they may be airborne and en-route to the destination within a matter of hours.

Our air charter product provides a reliable and efficient alternative to traditional shipping methods, ensuring the timely delivery of goods even in the face of disruptions. With a global network and a commitment to precision logistics, Airmacs empowers businesses to navigate the uncertainties of the modern supply chain. Get in touch and find out how we can help you.

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