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As we move through 2024, the global supply chain is facing unprecedented disruptions from several "black swan" events. The crises in the Red Sea and Panama Canal have already begun to ripple across the globe, and two additional looming threats further jeopardize the stability of international trade routes.

 

The Red Sea Crisis: A New Reality for Global Shipping

 

Status: Ongoing, expected to persist through 2024 or longer

Impact: The crisis in the Red Sea is affecting the safety of seafarers, causing environmental and collateral damage, and significantly increasing transit times. Cargo routes between East Asia and the rest of the world are being rerouted, with traffic through the Suez Canal cut in half.

Tensions have escalated further with a series of significant incidents:

 

• March 2024: The sinking of the Rubymar, the first civilian vessel lost in conflict since the 1980s "tanker war."

 

• March 2024: A Houthi missile attack on the True Confidence vessel resulted in the first fatalities linked to the Red Sea disruptions, with three crew members killed.

 

• August 22, 2024: The Greek oil tanker Sounion was suspected to have been hit by Yemen's Houthi rebels, adding to the mounting insecurity in the region.

 

These events have broad-reaching effects, including heightened security risks for crew members, environmental hazards due to the Rubymar's oil leakage, and rerouted traffic around the Horn of Africa, which has drastically increased shipping costs. Additionally, these changes are causing:

 

• A 203% surge in shipping costs from East Asia to the U.S. East Coast, pushing prices to $6,709 per container since late October.

 

• Extended transit times and congestion at major ports, with routes from Asia to the UK now taking nearly 30 days, contributing to global trade disruptions.

 

Industry analysts predict this crisis will persist, demanding more informed and proactive logistics management across the maritime industry.

 

 

The Panama Canal Drought: A Critical Chokepoint

 

Status: Ongoing

Impact: Severe drought has reduced water levels in the Panama Canal, a vital shortcut handling 5% of global trade. Since August, the canal has been unable to fully accommodate the $270 billion worth of cargo that flows through it annually. Despite attempts to alleviate the situation by offering additional transit slots in March, the restrictions are forcing vessels to explore alternative routes, increasing both transit times and shipping costs.

 

This crisis is especially affecting trade to and from the U.S. East Coast, with lasting repercussions expected throughout 2024 as vessel traffic patterns continue to shift.

 

The Threat of a U.S. East Coast Ports Strike

 

Status: Imminent

Impact: The International Longshoremen’s Association’s (ILA) master contract is set to expire on September 30, 2024, raising the prospect of a major strike at U.S. East Coast ports. With the ILA considering action as early as October, the maritime logistics sector is on high alert. A strike could cause severe supply chain disruptions, particularly if it results in manufacturing slowdowns and goods shortages.

 

Despite the looming threat, there has been little shift in TEU (Twenty-foot Equivalent Unit) capacity away from the East Coast, reflecting a cautious "wait-and-see" approach by shippers. The deadline for local contracts to be in place is May 17, adding another layer of uncertainty as the industry braces for potential service interruptions.

 

Potential 60% Tariff Hike on Chinese Goods if Trump Returns to Office

 

Status: Current tariffs remain in effect

Impact: Former President Trump has announced that, if re-elected, he plans to raise tariffs on Chinese imports by over 60%. This increase could severely disrupt the Trans-Pacific trade corridor, forcing maritime logistics companies to overhaul their strategies to mitigate the impact.

 

Signs of this potential disruption are already emerging. A 15% rise in shipments from China into the U.S. via Mexico has been reported, as Chinese manufacturers increasingly set up operations in Mexico to avoid U.S. tariffs. Should further tariff increases materialize, Mexico’s role as a strategic intermediary in global trade is expected to grow significantly.

 

 

 

ILA: Threat of strike at US East and Gulf Coast ports “Growing more likely.” (2024, July 15). The Maritime Executive. https://maritime-executive.com/article/ila-threat-of-strike-at-us-east-and-gulf-coast-ports-growing-more-likely

 

Douglas, J. (2024, August 10). China’s nightmare: A second trade war with Trump. The Wall Street Journal. https://www.wsj.com/economy/trade/chinas-nightmare-a-second-trade-war-with-trump-363313ae

 

Dagres, H. (2024, May 16). The Red Sea attacks highlight the erosion of U.S. leadership in the region. Atlantic Council. https://www.atlanticcouncil.org

 

Wilson, E. (2024, August 25). The EU finally takes the Red Sea crisis seriously. The Spectator. https://www.spectator.co.uk/article/the-eu-finally-takes-the-red-sea-crisis-seriously

 

Morgan, J. (2024, February 8). The impacts of the Red Sea shipping crisis. J.P. Morgan. https://www.jpmorgan.com/insights/global-research/supply-chain/red-sea-shipping

 

S&P Global. (n.d.). Essential intelligence [Video]. S&P Global. https://www.spglobal.com/en