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In the intricate dance of global commerce, the smooth flow of goods across vast oceans and through bustling ports is the heartbeat of our interconnected world. However, as we stand at the crossroads of weather-related havoc and geo-political turbulence, the pulse of the supply chain is facing yet again extreme challenges as we enter 2024. The rising costs and disruptions have become more than just economic nuances; they are reverberations of a world in flux. Read on about the current events impacting our supply chain as we enter into the New Year and how you can stay ahead of disruptions and mitigate risks.
The Impact of the Gaza War
The complex web of global shipping routes finds itself entangled in a mesh of unforeseen obstacles. Nearly every major carrier has announced that they will not go through Suez Canal due to Yemen’s Houthi attacks on vessels, targeting mainly Israeli flagged or owned vessels or those vessels headed to Israel, in the Red Sea. Planned routes are now to go around the Cape of Good Hope (southern tip of Africa) adding thousands of miles to their anticipated travel. This will add a minimum of 10-14 days to total voyage time, thus further increasing already slow sailing times and ultimately increase overall lead times on product receipts. (Ziady, 2024)
Detours and Delays Cause Major Ocean Freight Price Flux
Rising fuel prices, strained trade relations, and the lingering uncertainty of geopolitical tensions have cast a shadow over the efficient movement of goods. “All-in prices” of $5,000-$8,000 per container for major trade routes originating in Asia would be 2.5 to 4 times above “normal levels” for this time of year, according to Levine at Freightos. Although a significant increase, that is still 45%-75% below their “pandemic peak” in late 2021, he added. (Miller, 2023) With continued, prolonged disruptions, ocean freight prices could continue to rise.
Weather’s Wrath on the Supply Chain
From the unforgiving wrath of nature’s elements to the unpredictable shifts in political landscapes, the supply chain is grappling with an intricate puzzle that affects prices from every tier of the process. The Panama Canal, suffering stifling challenges with drought since Spring 2022 remains a fragile route. The temperatures are rising and water levels are falling. The historic drought continues on into 2024 and is causing ships to detour thousands of miles to avoid costly repercussions. These detours are costing time and money for businesses of all kinds all over the world. Customers need reassurance and predictably, something the Panama Canal cannot guarantee right now. (Millard, 2023). Recently, an increase in rainfall has helped ease drought conditions and allowed for more vessels to pass through the Panama Canal, however, the route is still not at full capacity and continues to experience delays for the unforeseeable future. (Ryan, 2023)
What Comes Next?
As we witness the repercussions reverberate through industries, the need to comprehend the intricate web of challenges facing shipping routes and trade ports becomes paramount. The seas may be turbulent, but by delving into the depths of these challenges, finding solutions with domestic manufacturing and shipping options, and partnering with our members for mission driven results, we strive to navigate towards a clearer understanding of the complex dynamics at play.
Be sure your healthcare organization is behind you, working hard to mitigate risks and finding solutions for a sturdy supply chain. Diversifying your supply chain with domestic and near-shore opportunities may help you with a predictable, reliable source for critical PPE. Because you shouldn’t have to worry about where and when your products may arrive, keeping your focus on what matters most- quality of care.
Visit S2S-Global.com/newsroom for more current events and important news stories around our evolving supply chain.
References: Millard, P., & Bloomberg. (2023, November 27). Panama Canal is so backed up and “unreliable” that ships are detouring thousands of miles to avoid costly delays. Fortune. https://fortune.com/2023/11/27/panama-canal-backed-up-water-shortage-ships-reroute/ Miller, G. (2023, December 21). Red Sea fallout much greater for containers than tankers, Bulkers. FreightWaves. https://www.freightwaves.com/news/red-sea-fallout-much-greater-for-containers-than-tankers-bulkers Mishra, R. D. (2023, December 28). Red Sea attacks, Panama Canal Drought: How trouble at two shipping choke points could impact global trade. The Indian Express. https://indianexpress.com/article/explained/explained-economics/red-sea-attacks-shipping-global-trade-panama-canal-9083539/ Ryan, J. (2023, December 15).Panama Canal to Allow More Ship Traffic in January as Rains Ease Drought. Bloomberg https://www.bloomberg.com/news/articles/2023-12-15/panama-canal-to-allow-more-ship-traffic-in-january-as-rains-ease-drought weel/Shutterstock, koen van. (2024, January 2). New disruptions, geopolitics hang over 2024 supply chains. The Wall Street Journal. https://www.wsj.com/articles/new-disruptions-geopolitics-hang-over-2024-supply-chains-6fca8f1e Ziady, H. (2024, January 3). Red Sea tensions: Maersk suspends shipping ‘until further notice’ | CNN ... https://www.cnn.com/2024/01/02/business/red-sea-houthi-attacks-maersk/index.html