The current climate of shipping lanes and logistics, particularly affected by events in the Red Sea, presents several significant disruptions and adjustments within the global trade and transportation sectors. Given the shifting nature of events and trade it is difficult to know what to do or how it may impact the UK economies, local businesses, and global logistics services.
However, we have compiled information from the latest updates (as of January 2024) to give you some tips to best plan for the future. As the industry's annual meeting place, Multimodal has always been at the forefront of addressing these challenges, fostering a community that spans shippers, retailers, manufacturers, wholesalers, importers, exporters, and their supporting suppliers. With our mission to enhance supply chain sustainability, efficiency, and innovation, we recognise the importance of navigating these uncertain times together. So let’s dive in.
The cessation of long-term shipping agreements by ocean carriers on the Asia-Europe route, due to the war risk in Red Sea transit, underscores the vulnerability of global supply chains to geopolitical tensions. The risk of using this route has caused many to question the viability of the region and look to other routes for a more stable and reliable supply.
Companies like CMA and Maersk have highlighted the challenges in predicting long-term contract rates, pointing to the lack of clarity over diversion durations, equipment availability, and the impact on port utilisation with a customer of Container xChange stating:
“All the big liners like the CMA CGM, MSC, Maersk and Hapag Lloyd have suspended operations through the Red Sea and hence, this will impact the SOC market positively. The pickup charges for shipper-owned containers will start to increase in the coming weeks.”
These disruptions are not merely logistical but have broader implications for industries reliant on just-in-time production models, such as the automotive sector, where production suspensions have been reported due to component shortages. For UK shippers this means keeping an eye on the news cycle is important to knowing exactly what is going on and when routes may open again.
In response to these issues, the industry is exploring alternatives, including the Northern Sea Route (NSR), air routes, and land bridges.
However, the NSR, despite its potential, faces significant logistical and geopolitical challenges, lagging behind the ambitious targets set by Russia. This route is one touted by Moscow and one in which they look to make Russia a central part of global trade. However, the use of this route has not met the estimates suggested and shows a very optimistic prediction of the route’s value. One of the issues plaguing this route is the lack of ships and icebreakers needed to ensure the viability of the route.
Meanwhile, innovative solutions like land bridges across the Middle East and rerouting around the Cape of Good Hope, as introduced by Hapag-Lloyd and others, offer promising detours around troubled waters but come with their own set of limitations in terms of capacity and operational feasibility.
We’ve already seen Hapag-Lloyd and Maersk adapt with the former linking Jebel Ali port to Jeddah via land and maritime shuttle services while the latter is utilising a land bridge involving trains to transport freight across Panama, creating two separate ocean loops for Atlantic and Pacific connections.
Air routes are another viable option even if they have limited capacity. According to Bloomberg Intelligence; [Bloomberg] expects the Red Sea diversions “could boost air cargo on select Middle East-Europe and Asia-Europe routes if tensions extend into” the second quarter.
The evidence for this is an increased rate of air cargo volumes in the area at the start of 2024. However, this may be a route for short-term use depending on access, cost, and the scale at which airlines can operate and fulfil demand.
Overall, it’s clear to see that all major shippers are keeping an eye on activity in the Red Sea to see when it is safe and feasible to return but for the time being it seems that having agile routing options will be the best option for all parties involved in the supply chain.
In light of these developments, it may be difficult exactly where to go or what to do. However, we have some general guidelines to help you navigate these difficult times and plan as best as possible for any disruptions.
Diversify Supply Chain Routes: Do not rely solely on traditional shipping lanes. Explore and invest in alternative routes and modes of transport, including land bridges and air freight, to ensure flexibility and resilience in your supply chain. This may mean courting new suppliers or businesses but with the right research could prove vital to your service offering.
Stay Informed and Agile: Keep abreast of geopolitical developments and their potential impacts on global logistics services. Agility in decision-making and the ability to pivot strategies quickly are crucial in navigating uncertainties. Being proactive is the best way to avoid disruption so if you have the resources to do so, invest some time in monitoring UK shipping news and routes and their viability. Staying a step ahead may help you shift before it’s too late.
Invest in Technology and Innovation: Leverage technological advancements to enhance visibility and control over your supply chain. Digital tools can provide real-time data on shipments and help identify potential disruptions before they occur. Generative AI and automation are fast becoming a central part of every business. Logistics are no different and can benefit from intelligent automation where feasible.
Collaborate for Sustainability: Engage with partners and stakeholders to explore sustainable logistics solutions. Multimodal 2024 will continue to highlight the importance of sustainability in supply chain management, echoing our 2023 theme. Speak to suppliers, partners, customers, and anyone else you are in contact with to see how they are dealing with these issues. There may be common ground and potentially a business opportunity.
Attend Multimodal 2024: Join us at Multimodal 2024 to connect with industry leaders, discover innovative solutions, and participate in discussions on overcoming logistical challenges. Our conference streams will cover sustainability, resilience, technology, and people, ensuring you stay at the cutting edge of industry developments. Our annual event is a great way to find out what’s on the horizon and meet key players in the industry.
Global logistics services are no stranger to challenges, but the current climate requires an unprecedented level of adaptability and forward-thinking. At Multimodal, we are committed to supporting our community through these turbulent times, offering a platform for collaboration, learning, and growth. By staying informed, flexible, and proactive, we can navigate these uncertain waters together, ensuring the resilience and sustainability of our supply chains for the future.