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31.01.2024

Red Sea Conflict Sparks Global Shipping Challenges

The current crisis is leading to an increase in freight expenses and delays in container shipments.

New Zealand's manufacturing sector is keeping a watchful eye on the intensifying conflict in the Red Sea, prompted by a series of attacks on commercial cargo ships in recent months. The persistent disruption is poised to reverberate globally, potentially fueling higher inflation levels and amplifying the challenges faced by the international shipping industry due to supply chain disruptions.

As the challenges escalate, some of the world's largest shipping companies find themselves compelled to suspend Red Sea routes and redirect vessels, underscoring the severity of the situation and its far-reaching implications for global shipping operations.

Chart Drewry World Container Index

Charges for transporting a 40-foot container from China to Europe have surged, according to the Drewry World Container Index

Complicating matters further, the alternative route for East-West trade involves navigating around the Cape of Good Hope at the southern tip of Africa.

This strategic adjustment not only extends sailing times by 10-14 days but also incurs additional fuel costs, compounding the challenges faced in maritime transportation between Europe, Asia, and the Pacific.

Extended periods at sea for each vessel translate to a slower turnaround in loading their subsequent cargo, thereby restricting the available shipping capacity and contributing to the escalation of freight costs. This echoes the challenges experienced with container availability during the disruptions in the global supply chain in 2021 amid the Covid-19 pandemic.

The repercussions of higher freight costs and the scarcity of vessels, stemming from the conflict, are cascading down the supply chain, affecting New Zealand's timber suppliers. At this stage, it is not known how long the conflict will continue and how long the supply chains will be disrupted. Please plan for delays on all shipments. We suggest holding safety stocks and planning orders in advance where possible.

Carefully Crafted Timber Abodo Wood 04

References – RNZ and The National News

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