We have seen significant volatility since the escalation of hostilities in the Middle East. The team at Warrant are on hand to offer independent advice and assistance, so please feel free to reach out to Hannah or John.
An overview of the current picture can be summarised as follows :
• All carriers have suspended services in/out of the Middle East region, and many have enforced Force Majeure, essentially placing responsibility on the cargo owner to take control of their goods, which are likely to be discharged some distance from the initial destination
• There have also been significant surcharges levied in the guise of war risks and emergency premiums, in some cases totalling around $4000 per 40’ container. There will be further costs for any diversions under Force Majeure
• 10% of global trade moves within the Gulf/Red Sea region. Delays and diversions on this trade will contribute towards global congestion, artificial capacity reductions on multiple trades, and potential equipment shortages in key locations
• The potential blockade and heightened risk of transiting oil through the Strait of Hormuz is likely to have a profound impact on oil availability/pricing, as 20% of the worlds oil is routed through this passage
• Suppliers of some of Warrant’s clients are trying to impose further price adjustments due to increased pricing of raw materials and heightened energy costs
• Impact on the China to Europe leg is already happening with shipping lines reversing the current trend and doubling spot prices from 15/03. We remain sceptical of the overall impact the conflict will have on capacity from China but panic and confusion often leads to increased buying patterns which will create an artificial sense of demand prior to a key negotiating period in April. Consequently, some carriers believe there are now opportunities for revenue enhancement on long term deals
• Air freight volatility has been heightened through widespread suspension of passenger and freight services throughout the region. Costs have risen by over 150% from multiple areas
The conclusion from a supply chain perspective is that there is pressure on costs across multiple trade-lanes. Outside of the Middle East region which is essentially in shutdown, global disruption is likely albeit at this stage Warrant believe largely limited to pockets of congestion, vessel, and equipment availability. Pricing is going up from April, but Warrant have fixed contracts that can negate these challenges so please feel free to contact them and they can expand on their service offering and pricing options:
Hannah Morgan, Key Account Business Development Manager, Hannah.morgan@warrant-group.com
John Gibbs, Managing Director, john.gibbs@warrant-group.com
