Indian Transport & Logistics

Another 'Black Swan' event: Red Sea blues for supply chains

MSC, CMA CGM halt Red Sea sailing after attacks; only positive - Panama Canal increases crossings from January 2024

Another Black Swan event: Red Sea blues for supply chains
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MSC, the world's largest container shipping company, has decided not to transit the Suez Canal - Eastbound and Westbound - after an attack on MSC PALATIUM III on December 15, 2023.

"All crew are safe with no reported injuries while the vessel suffered limited fire damage and has been taken out of service. Some services will be rerouted to go via the Cape of Good Hope," MSC said in a statement.

"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."

CMA CGM, the third largest container shipping company, has also instructed all containerships in the area that are scheduled to pass through the Red Sea to reach safe areas and pause journey in safe waters with immediate effect until further notice.

"The CMA CGM Group is deeply concerned about the recent attacks on commercial vessels unfolding in the Red Sea Region. We have been taking over the past days increasing prevention measures to ensure the safety of our vessels and their crews navigating these waters. The situation is further deteriorating and concern of safety is increasing," says an official statement.

CMA CGM, the release added, is taking all necessary steps to preserve its transportation services for customers.

Maersk and Hapag-Lloyd, had last week, announced a pause on Red Sea sailings after Yemen-backed Houthis attacked ships in what is being termed as "retaliatory" steps against the Israeli war against Hamas.

Kuehne+Nagel, in an update to customers, says:"In light of recent incidents impacting container vessels in the RedSea, Kuehne+Nagel is actively monitoring the situation. While vessel security and port call decisions rest with operators and captains, we stand firmly in support of their efforts to prioritise crew and vessel safety.

"Through real-time communication with our carrier partners, we are well-prepared to respond promptly and adjust our customers' supply chains if needed due to vessel rerouting. We have already noted initial re-routings and voyage pauses. In collaboration with our carrier partners, we anticipate further adjustments. Please be aware that these changes may lead to extended transit times. The round trip of a vessel from Asia to Europe may add three-four weeks while other routes like the Transpacific could have varying additional transit times. Our commitment is to minimise disruptions and provide unwavering support throughout this process."

The Suez Canal Authority (SCA) said 55 ships have rerouted via the Cape of Good Hope since November 19 amid attacks on ships in the Red Sea.

In a statement, SCA chairman Osama Rabie said 2,128 ships had crossed the waterway during the same period. “We are closely monitoring the impact of the current tensions in the Red Sea and studying their impact on navigation via the canal,” says Rabie.

Maritime safety expert Ian Ralby, in his LinkedIn post, says the Houthi attacks in the Red Sea could spark significant global economic hardship with major humanitarian consequences. "The Houthis, however, are enjoying their new-found global relevance. While their attacks thus far have been ostensibly in support of Gaza, they are likely to lose the plot - as they so often do - and become increasingly enamoured with the power to impede global commerce. We cannot analyse them with the "rational" thinking that we employ. While we might be upset if we were trying to focus on vessels tied to one state (Israel in this case), the Houthis simply don't care if they get it wrong. Without a swift and meaningful response, this could be the start of a painful period.”

Logistics expert Nick Coverdale says in his LinkedIn post: "I think we can safely say shipping has or is stopping via Suez and all sailings will be via the Cape of Good Hope. One should start planning accordingly .

"Unlike the Ever Given this is not an instant fix, the Houthi militants are land based and to dislodge them would require a land assault (who wants to undertake that?) or some type of diplomatic agreement (but who has a diplomatic contact with the Houthis?)

"Don't like to be pessimistic but unless something extreme happens like all out war on the Arabian Peninsula or somebody can persuade Iran to use its influence and call off the attacks this could go on for months, yes months."

Some Panama respite
In a change of stance, the Panama Canal authorities will increase the number of daily transits to 24 starting in January, says an official release.

"Currently, 22 vessels transit daily, divided into six Neopanamax and 16 Panamax. This restriction is in response to the challenges posed by the current state of Gatun Lake, which is experiencing unusually low water levels for this time of the year due to the drought induced by the El Niño phenomenon."

October 2023 marked the driest October on record for the Canal watershed, the update added. "In anticipation of a potential worsening of the situation in November and December, the decision was made to adjust the number of daily transits to 22 in December, 20 in January and 18 in February. This year marks the first time the Canal has ever had to restrict transits."

Additionally, the Panama Canal will allow one booking slot per customer per date with some exceptions for quotas offered to vessels competing through the reservation system, the update added. "The measures allow the majority of vessels that want to transit the Canal to have a better chance of obtaining a reservation."

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