How to Prepare Your Supply Chain for Red Sea Attack Disruptions

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In a surprising turn of events, a leading ocean supply chain advisory firm has issued a stark warning, asserting that the recent Houthi rebel attacks in the Red Sea are causing disruptions more severe than those witnessed during the early days of the Covid-19 pandemic. Sea-Intelligence, a prominent player in maritime analysis, conducted a comprehensive assessment of current vessel delays, revealing a significant blow to the supply chain, surpassing even the challenges posed by the initial stages of the pandemic.

Sea-Intelligence Analysis: The Impact on Vessel Capacity

A Disturbing Trend

Sea-Intelligence’s analysis focuses on the concept of “vessel capacity,” a critical metric in the maritime industry denoting the availability of vessels to pick up containers at ports. The current scenario, marked by longer transits around the Cape of Good Hope as ships divert from the Red Sea, is already resulting in a more substantial impact on vessel capacity than the disruptions experienced during the early days of the Covid-19 pandemic.

The Rising Threat of Red Sea Attacks on Supply Chain Stability

Unprecedented Setback

According to Alan Murphy, the CEO of Sea-Intelligence, the drop in vessel capacity is the second largest in recent years, with only the infamous “Ever Given” incident in the Suez Canal surpassing the impact of the Red Sea crisis. Billions in trade were halted during the six days the Ever Given blocked the canal in March 2021. Remarkably, the current Red Sea crisis now stands as the largest single event, even overshadowing the early pandemic’s repercussions.

A Tale of Two Phases: Pandemic vs. Red Sea Crisis

Pandemic Phases

Sea-Intelligence draws a parallel between two distinct phases of the pandemic and the current Red Sea crisis. The initial phase primarily affected Chinese ports due to Covid-19-related restrictions, while the second phase witnessed a global spread of the pandemic, impacting supply chains across the world.

Vessel Capacity Dynamics

A crucial difference lies in the vessel capacity that could be brought back online. Unlike the pandemic period when all vessels were actively in use due to historic demand, the maritime industry today has new vessels available for deployment. This newfound flexibility could potentially mitigate the impact of the Red Sea crisis on vessel schedules.

The Path Ahead: Potential Solutions

Deploying Additional Vessels

To counter the delays caused by diversions around the Cape of Good Hope, Murphy suggests that ocean carriers will need to add one or two additional vessels to their rotations. While there is currently approximately 10% of the world’s fleet not in service, deploying additional vessels after the Chinese New Year could provide a much-needed solution.

Global Industry Collaboration

Murphy emphasizes that a collective effort is essential for finding a Suez-like solution to the Red Sea crisis. The safety of crews and the security of cargo are paramount concerns, making it imperative for industry stakeholders to collaborate and address the existing and potential threats comprehensively.

Ripple Effects on Global Brands and Energy Markets

Impact on Manufacturing Giants

The delays in container arrivals are already reverberating through various industries. Manufacturing giants like Tesla, Volvo, and Michelin have reported halts in production. Ikea, British retailer Next, and Crocs are among the companies warning of product delays. The threats to Red Sea shipping pose a significant risk to maritime commerce worldwide.

Energy Market Dynamics

Beyond manufacturing, the diversions away from the Red Sea are causing ripples in energy markets and affecting product tanker operators. Shell and BP have suspended shipments through the Red Sea, and several tanker operators and energy companies are choosing alternative routes. The longer transit times around the Cape of Good Hope could create a supply shortage of tankers, impacting product tanker rates.

Conclusion: Navigating Uncertain Waters

As the maritime industry grapples with the aftermath of the Houthi attacks in the Red Sea, the challenges posed surpass those witnessed in the early days of the Covid-19 pandemic. Industry leaders are urged to collaborate, explore solutions, and brace for potential long-term impacts on global supply chains. Deploying additional vessels and finding a collective Suez-like solution post-Chinese New Year could be the key to ensuring the stability and resilience of the maritime industry in the face of unprecedented disruptions.

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