Pressure on global shipping routes create stress in global supply chains again

BY: Sam Chambers
GENEVA (SPLASH247): Insurer Swiss Re has come up with a chart to highlight the dramatic changes to the world seaborne map in recent years as shipping faces disruption in the Red and Black Seas as well as the Panama Canal and multiple drying up rivers.

“Pressure on global shipping routes is creating stress in global supply chains again, soon after the acute disruption experienced in the pandemic,” Swiss Re noted in a new report entitled Navigating shipping disruptions: signs of rougher seas ahead.

Contained in the report Swiss Re has a chart outlining shipping capacity transiting through the world’s top chokepoints in tonnes from 2019 to last month.

“The Panama Canal and the Suez Canal/Bab el-Mandeb route are just two of an array of shipping chokepoints, many of which have seen large increases in traffic since 2019,” the report noted, adding: “Increasing geopolitical risks may threaten trade through those areas too. More frequent droughts are likely to jeopardise transit volumes in the Panama Canal, and climate change is already affecting river shipping, as seen in the Rhine and Mississippi. We view these as headwinds to the long-term resilience of global shipping trade.”

Commenting on how the global seaborne map has changed in recent years, Mark Williams, founder of consultancy Shipping Strategy, told Splash: “Russia’s war in Ukraine and the multifaceted conflict in the Middle East have had direct impacts on shipping, driving inefficiency and raising costs for cargo owners.”

Looking specifically at the Red Sea shipping crisis, the latest data from Clarksons Research shows that as of the start of this month, average crude tanker Gulf of Aden arrivals were down nearly 60% compared to the first half of December, while bulk carrier arrivals were down 55% from the first half of December. Container analysts suggest as much as 90% of ships heading on the Asia-Europe tradelane have switched to the Cape of Good Hope route.

Quantifying the tonne-mile increase, in its base case scenario, Clarksons estimates a 0.6% increase in global seaborne tonne-mile trade on a full-year basis assuming that Red Sea disruptions last for just Q1 and with 30-100% re-routings on impacted trades. In this base case, container teu-miles increase the most at 2% for the full year and product tanker tonne-miles rise 1.3%; crude and bulk see a minimal impact. However, in its stretch case scenario, Clarksons assumes the disruptions will be ongoing with 90% re-routing on all affected trades and drive 5.5% uplift in global tonne-miles; container and crude to rise 10% and product tankers by 20%, with bulk seeing just 2% uplift. However, Clarksons believes that the tanker segment will see more shifts in trade flows to offset the re-routings.

The incremental costs of diverting a tanker from Asia to northwest Europe via the Cape of Good Hope is accounting for an extra $932,905 per voyage while increasing transit time from 16 days to 32 days according to a recent report by LSEG Shipping Research, formerly known as Refinitiv.

These additional costs mostly account for extra fuel and increase costs for an aframax tanker by 110%, while for a large container vessel it increases by 35% for a voyage between Asia to northwest Europe.

“The complex interconnection of geopolitical events, maritime security concerns, and global trade dynamics underscores the multifaceted challenges facing the shipping industry in the current scenario,” a recent report by Veson observed.

Over in the western hemisphere, meanwhile, authorities at the Panama Canal have warned April is the absolute earliest time that the waterway might increase transits from the current 24 maximum. When operating at full capacity the canal can handle up to 40 vessels a day. As well as cutting daily transits the Panama Canal Authority has also slashed the maximum draft at its larger locks by close to 2 m as the nation battles an unprecedented drought.