Middle East Archives | Page 9 of 9

New Silk Road will link the Gulf to Europe

Jun 27, 2024 | Exports, International Trade, Middle East, Project, Rail, Sea, Supply Chain, Turkey

Turkey, Qatar, and the UAE are joining with Iraq to develop a new land corridor – Development Road Project – which will connect the Gulf to Europe.

The Development Road Project is a multi-billion dollar land corridor that will stretch 750 miles from the Persian Gulf to the Mediterranean Sea, establishing a network with railways, roads, ports and cities, to significantly reduce travel time between Asia and Europe via Turkey.

Estimates for the costs of the Development Road Project range from $8 billion to $15 billion, and possibly up to $20 billion, which may be financed by the UAE, Qatar, or another country, with the entire project expected to be completed within five years, once the funding is secured.

In May 2023, Baghdad hosted a summit which brought together transport ministers and officials from the European Union, the World Bank, GCC, Iran, Turkey, Syria and Jordan to discuss the establishment of the Development Road initiative.

The Development Road, dubbed the “Iraqi Silk Road”, gained further attention during the G20 Summit in New Delhi last September, when the project was discussed as an alternative route to the Suez Canal, to aid faster and more efficient trade between Asia and Europe.

The project is expected to turn Iraq into a transit hub and compete with Egypt’s Suez Canal, strengthening Iraq’s geopolitical position in the region and the world, while supporting security and stability in the region.

In April 2024, a quadrilateral memorandum of understanding, regarding cooperation in the Development Road project was signed by the transportation ministers of Iraq, Turkey, Qatar and UAE, with railways and highways connecting to Iraq’s Great Faw Port, aimed to be the largest port in the Middle East.

The project is planned to be completed in three stages by 2028, 2033 and 2050 and will open Iraq to the world through Turkey. It will generate $4 billion annually and create at least 100,000 jobs.

We will keep you advised and updated as this initiative proceeds, sharing any important developments and seeking market opportunities as they materialise.

If you have any questions or concerns about the ‘new Silk Road’, or would like to discuss the potential implications and benefits of this initiative, please EMAIL our Chief Commercial Officer, Andy Smith.

State of the air freight market

May 1, 2024 | Air, eCommerce, India, International Trade, Middle East, News, Sea/Air, Supply Chain

The effective closure of the Red Sea and the Suez Canal to container ships is adding around two weeks to supply chain transit times and creating a backlog of manufacturing components, late shipments and inventory replenishment, with critical consignments reliant on air solutions. While Iran’s attack on Israel has led to major carriers rerouting or cancelling flights and causing potential bottlenecks and price hikes.

Traffic ex-South Asia has been particularly driven by the Red Sea push to air, with spot rates climbing significantly.

Contributing significantly to demand has been a massive spike in eCommerce volumes out of China, which is pushing prices well above typical levels for non-peak periods.

Average spot prices to North America have nearly doubled since mid-December, while Europe rates have climbed over 120%.

The eCommerce spike has seen Heathrow (LHR) imposing restrictions on ad-hoc freighters and charters from Shanghai, which has resulted in diversions to alternative gateways, including Birmingham International, with at least one charter operator transferring their slots away from LHR to Birmingham (BHX).

Traffic ex-South Asia has been particularly driven by the Red Sea push to air, with spot rates climbing significantly. Average spot prices to North America have nearly doubled since mid-December, while Europe rates have climbed over 120%.

The recent loosening of US restrictions on the number of weekly flights to the US allotted to Chinese carriers will increase China to US air capacity and could ease some pressure on rates.

The closure of Iranian airspace, due to safety concerns, following Iran’s attack on Israel has led to major carriers rerouting or cancelling flights and causing potential bottlenecks and price hikes for shipments from India.

Carriers operating to Europe are using alternative routes; primarily through Turkey and Azerbaijan, for Middle-East and Chinese carriers or via Egypt and Saudi Arabia for European/Western carriers. While major carriers, including Air India, Emirates, Qatar Airways and Lufthansa Cargo are temporarily suspending flights to Israel and other affected destinations.

The need to carry (and buy) additional fuel for the extended flights means that there will be a payload impact to passenger flights operating from India to Europe and vice versa, as they will need to significantly restrict the cargo payload, which reduces capacity and increases cost.

The seizure of the MSC Aries by Iran in the Strait of Hormuz raises concerns about the accessibility of the Dubai port, a crucial hub for sea-air transshipments, because if Hormuz is considered a high-risk area, it could mean sea-air shipments being diverted to alternative hubs like Colombo or Bangkok.

Whether rates will soften, or supply vs demand become an issue in the next quarter and beyond depends on world geopolitical events improving, the Red Sea re-opening up and no other global crisis occurring.

If there are no further global events then the market is very likely to soften, however, if the Israeli/Iran situation deteriorates airspace could be closed for the foreseeable future and that will cause huge issues to all logistics activities including airfreight, sea/air, ocean and rail.

For urgent, valuable and sensitive shipments we have a range of airfreight and sea/air solutions, with block space agreements (BSA) and capacity purchase agreements (CPA) that protect space and capacity on the busiest routes.

Regardless of your cargo type, size and requirements, we have extremely competitive rate and service combinations, to meet every deadline and budget.

EMAIL Elliot Carlile, Operations Director, for insights, prices and advice.

Red Sea crisis expanding and growing

Apr 17, 2024 | 4PL, Automotive, Chemical, China, Exports, Insurance, International Trade, Middle East, Sea, Supply Chain

After the longest period of attack-free shipping in the Red Sea since December, the situation in the region is escalating, with an increase in Houthi attacks, fears that the ‘danger area’ may be expanding into the Arabian Sea and Indian Ocean and an Iranian vessel hijack off the Gulf of Oman.

At virtually the same time the US special envoy for Yemen indicated that the US might consider a path to revoking the terrorist designation on the Houthis if attacks on vessels are halted. The Yemeni group resumed attacks after an eight day pause and claimed to have attacked a number of warships and commercial vessels in the Arabian Sea and the Indian Ocean.

The Houthi claims have not been corroborated and it remains uncertain if they have the capability to acquire targets that far out to sea. However, if they have been successful it may have implications for shipping, possibly forcing it to head further east and making access to the Gulf harder.

Iran hijack
In a further, unexpected development, the 15,000 teu MSC Aries was boarded and seized by Iranian Revolutionary Guard troops in international waters off the Gulf of Oman in the Straits of Hormuz on Saturday 13th April.

The Aries was managed by Zodiac Maritime, a firm controlled by the Israel-born shipping magnate Eyal Ofer, but the vessel is currently chartered to MSC and its current links to Zodiac is unclear.

Iran’s action means the ‘maritime danger zone’ has expanded significantly and the ramifications of this illegal vessel seizure could be massive, potentially providing a catalyst for freight rates to rise in the short-term.

Insurance check
We would recommend double-checking your cargo insurance, to clarify what it covers, but also to ensure its validity should your cargo suddenly be in a war-zone, even if the planned route was not intended to transit a war-zone.

Anticipate increased risk premiums for insurance and freight to and from the Persian Gulf area, and also the Gulf of Oman, and not necessarily labelled as a risk premium but another acronym.

Scenarios
We do not anticipate a full closure of the Strait of Hormuz, it is more likely to resemble the southern Red Sea where some shipping lines will still operate and some will not. However, a partial closure could backfill, escalating port congestion problems at origins including Sri Lanka, Singapore, Port Klang and Indian ports.

Finally, it is clear that threats against shipping made by Iran, and their proxies have not been idle and it might be prudent to recollect the threat made by an Iranian Revolutionary Guards commander to target shipping in the Mediterranean.

Groups in Algeria have received attack drones from Iran, which have the potential to impact shipping in the Eastern Mediterranean.

If you have any questions or concerns about the impact of the Red Sea crisis on your Asia supply chain, or would like to discuss its wider implications, please EMAIL our Chief Commercial Officer, Andy Smith.

For questions about airfreight, sea/air and our suite of time-sensitive solutions EMAIL Elliot Carlile, Operations Director, for insights, prices and advice.

For insurance related questions or concerns please EMAIL our Chief Financial Officer, Laurence Burford.

Sea/Air growth undiminished

Mar 8, 2024 | 4PL, Air, International Trade, Middle East, Sea/Air

The latest air cargo data is showing a clear upswing in volumes at key sea/air hubs, as shippers from Asia seek to avoid the extended ocean freight transit that has resulted from the Red Sea shipping crisis.

Over the first two months of the year, volumes to Europe from Dubai, Colombo and Bangkok have increased between 60-70% year on year, while volumes from Singapore increased 10% and Doha by 3% year on year.

As reported in our last bulletin air cargo handlers in both Dubai and Bangkok had implemented a temporary embargo as they struggled to keep up with demand.

Our Sea/Air team are seeing massive volume increases out of Asia, with recent bookings passing the 400 ton mark, which is close to 3x what they would be typically processing at this time of year.

Traffic to Europe from Dubai almost tripled in week seven, having grown nearly 100% over the preceding weeks, while ex-Colombo volumes doubled and Bangkok-Europe tonnages were up 2/3rd’s.

The air freight leg from the hubs and particularly Dubai have become more complicated, with USA bound traffic offering greater yields, which means that many carriers are giving the higher earning cargo priority over 2nd Sea/Air volumes into the UK and Europe.

Metro work around the cherry-picking of higher yielding traffic with our airline block space agreements (BSA) and capacity purchase agreements (CPA) that protect space and capacity, or by using alternative hubs when appropriate.

While there is no certainty that demand for sea/air solutions will continue, there is clearly elevated tonnages to Europe from all the major sea/air hubs currently and it remains to be seen what impact the Lunar New Year holidays will have.

So far at least, volumes remain high out of Dubai, Bangkok and Colombo, but there could be be some lag as the effects of the LNY-related factory closures kick in. Time will tell.

Demand for air cargo
Air cargo demand increased by 18.4% year on year in January the second month of double-digit percentage increases, and the highest increase since summer 2021.

The newly released IATA data shows that cargo tonne kms (CTK) and available capacity both increased, the latter by 14.6% year on year, as belly space continued to be added to the market.

The increase is attributed to rising eCommerce demand and modal shift as a result of the Red Sea shipping crisis.

Looking at regional performance, Asia Pacific airlines saw their air cargo volumes increase by 24.6% year on year in January.

Carriers saw ongoing growth in international CTKs on three major trade lanes: Africa-Asia (+52.5%), Middle East-Asia (+29.5%) and Europe-Asia (+27.5%).

The air freight market is particularly challenging from India currently, with congestion on some routes/lanes leading airlines to increase rates significantly in recent weeks.

India’s economy is buoyant and exports are strong, rising over 3% in January despite the Red Sea crisis.

However, there are limited numbers of outbound flights, in particular cargo only flights, with much air cargo reliant on transhipment services moving through hubs including Dubai, Qatar and Kuwait Airways.

With high demand for first leg flights from India into the transhipment hubs carriers will take higher yielding freight as priority and with USA freight offering premiums of over 100%, UK and European freight becomes less attractive.

Approximately 80% of cargo from India tranships, but the same competition exists on direct flights. British Airways, as an example, will favour the much higher rate available for transhipment freight into North and South America, rather than lower paying cargo destined for Europe. This is a fact.

However we have our own BSA’s and CPA agreements with airlines protecting space and capacity over a fixed period which generally gets honoured from all main gateway airports in India.

For urgent, valuable and special shipments we have a range of air freight and sea/air solutions, with block space agreements (BSA) and capacity purchase agreements (CPA) that protect space and capacity on the busiest routes.

Regardless of your routing and requirements, we have extremely competitive rate and service combinations, to meet every deadline and budget.

EMAIL Elliot Carlile, Operations Director, for insights, prices and advice.