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Suez and Panama ‘perfect storm’ threatens supply chains

10 January 2024

WITH ACCESS to the Suez Canal disrupted by Houthi attacks on Red Sea shipping, plus spiralling costs and delays caused by the Panama Canal drought, global supply chains are under strain.

Losing unrestricted access to these two vital trade routes will mean spiralling costs and lengthy delays, impacting shippers and carriers.

ParcelHero’s David Jinks said: “The world’s big three shipping lines, MSC, Maersk and CMA CGM, announced they were pausing Suez Canal transits at the onset of the attacks, with many ships re-routing via the Cape of Good Hope rather than risk being fired upon.

“Consequently, Asian-manufactured goods heading for the UK have been delayed and costs have increased significantly. With global trade in the doldrums, many multinational companies had become used to very cheap services, as the big shipping operators fought over the available custom. However, shipping lines prices are now rising steeply and unexpectedly, and this is having an impact on manufacturers and retailers. From Next to Ikea, many well-known retailers have already sounded the alarm as the attacks continue and disruption increases.

“Not only are there delays and increased fuel costs but also increased insurance coverage fees, as the Cape route is considered less safe due to potential pirate attacks and poor weather around Africa.”

“Meanwhile, the world’s other great shortcut, the Panama Canal, still faces its own crisis. The amount of goods carried by vessels using the canal has been massively reduced and there are now severe cuts to the daily number of ships permitted to use the vital trade link.”

Gerry Power, UK head of country at TMX, added: “Major shipping companies like Maersk halting vessel movements will continue to increase transportation costs and logistics expenses. Industries dependent on just-in-time manufacturing and efficient supply chains will suffer production setbacks, which will have a flow-on effect to consumers here in the UK. 

“To mitigate the negative supply chain impacts, companies who have proactively diversified suppliers and transportation routes will be in a good position. Leveraging advanced technologies for enhanced visibility, maintaining strategic inventory reserves and implementing agile risk management strategies will be crucial.”

Freight software company Project44 reported that downstream inventory issues are likely to be noticeable to consumers in February, with a potential increase in out of stock items.