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Supply chains brace for more disruption as storm season intensifies

Sep 17, 2024 | , , , , , , , , , , , , , , , , , , , , ,

From wildfires and floods to scorching heatwaves, the consequences of climate change are becoming more pronounced, and as we enter the peak shipping season, businesses are scrambling to prepare for what is predicted to be one of the most disruptive storm seasons in recent memory.

So far in 2024 supply chain disruptions caused by extreme weather are estimated to have cost companies billions of pounds, and the storm season is far from over. Hurricanes, wildfires, and floods have already stretched global supply lines thin, and the arrival of storms like Typhoon Bebinca, which threatened Shanghai this week, adds a fresh layer of concern.

Increased visibility allows managers to pinpoint disruptions and adjust supply chains accordingly, and the key to weathering these events lies in preparation. Shippers are diversifying their carrier bases and building inventory buffers to keep goods moving in the face of challenges. Strategic planning, such as maintaining safety stock for high-demand items, has become essential in managing supply chain risks.

The heightened storm season comes as companies are already reeling from the effects of wildfires in California and Australia, as well as floods that have caused widespread damage to transportation networks in Asia.

While technology and data-driven insights have made supply chains more resilient, this year’s relentless barrage of natural disasters is proving particularly difficult to navigate. While technology can help predict and respond to the impact of storms, it is only effective when paired with clear communication and regular updates on shipments.

The threat posed by Typhoon Bebinca is yet another reminder of the supply chain vulnerabilities that remain, with Shanghai closing ports, cancelling, and halting transportation links to ensure safety. With more storms likely in the coming months, companies must remain agile and vigilant, ready to adapt to further disruptions.

The need for resilience and adaptability is more pressing than ever, as companies navigate the challenges ahead. This season may prove to be one of the toughest in recent memory, but for those prepared, there are still opportunities to maintain operational continuity in the face of adversity.

Extreme weather events consistently highlight the vulnerability of supply chains and the importance of robust contingency plans and marine insurance to protect against risk.

We have been maintaining supply chain resilience in the face of unforeseen challenges for decades. To learn how we can develop and support your supply chain resilience EMAIL our Chief Commercial Officer, Andy Smith.

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New shipping alliances for 2025

Sep 17, 2024 | , , , , , , , , , , , , ,

With the dissolution of the 2M partnership between MSC and Maersk in February 2025, new partnerships and slot-sharing agreements are emerging, positioning shipping companies in a transformed global market.

One of the key developments is the formation of the Premier Alliance, which will replace THE Alliance. This new partnership brings together Ocean Network Express (ONE), HMM, and Yang Ming, with MSC also entering into a vessel-sharing agreement (VSA) with the group.

The Premier Alliance will focus on key East-West trade lanes, including Asia-Europe, Asia-North America, and Asia-Mediterranean routes. The agreement will offer customers more direct coverage and frequent sailings, with plans for six Asia-North Europe services, including five in cooperation with MSC.

Now the world’s largest container shipping company, MSC has moved quickly to capitalise on its scale. Following its departure from the 2M alliance with Maersk, MSC will operate largely independently while maintaining slot-sharing agreements with the Premier Alliance and Zim.

MSC will manage 34 loops across five major trade routes, covering Asia-North America, Asia-Europe, the Mediterranean, and the trans-Atlantic. It will offer customers direct port-to-port services, providing over 1,900 direct port pairings through the Suez Canal (when it is accessible) and more than 1,800 via the Cape of Good Hope.

The formation of the Gemini Cooperation, a new alliance between Maersk and Hapag-Lloyd, adds another layer of competition. Unlike MSC’s direct coverage approach, Gemini Cooperation will focus on a hub-and-spoke service network. This divergence in strategy highlights how alliances are tailoring their operations to meet the specific needs of global trade.

As these alliances come into play, the shipping landscape will continue to evolve. The Premier Alliance and MSC, with their extensive network of direct services, will provide enhanced port coverage and flexibility, while Gemini Cooperation’s hub-based model may appeal to shippers seeking more consolidated routes.

Together, these developments signal a reshaping of global shipping routes, aimed at increasing efficiency and meeting the growing demands of international trade. With direct access to over 80 ports and expanded service options, the new alliances are set to redefine global logistics for the years to come.

We will keep you advised and updated on important developments within the container ocean freight market as they materialise.

If you have any questions or concerns about the Premier Alliance agreement, or would like to discuss the wider implications of the shipping alliance changes, please EMAIL our Chief Commercial Officer, Andy Smith.

strike at port

Ongoing labour disputes threaten global supply chains

Sep 4, 2024 | , , , , , , , ,

While recent developments in India and Canada suggest some relief from labour disputes, the threat of strikes continues to loom over port operations and global supply chains. The situation remains precarious, especially with the added complications from Red Sea diversions, which could magnify the impact of any further industrial action.

Typically, strikes at ports and other supply chain hubs cause only localised disruptions. However, the current climate is fraught with uncertainty. Sea-Intelligence has warned that even a single day of strike action on the U.S. East Coast could create a six-day backlog to clear containers.

If a strike were to last a week in early October, its effects might not be fully resolved until mid-November, while a two-week strike’s impact might be felt well into 2025, further straining already fragile supply chains.

Recent resolutions

Canada
The Canadian government acted within a day to end a rail strike that began on 23rd August, ordering Canadian Pacific Kansas City (CPKC) and Canadian National (CN) to resume operations and enter binding arbitration with the Teamsters Union. The Canada Industrial Relations Board extended expired collective agreements until new ones are finalised, temporarily safeguarding the supply chain.

However, the union has challenged this decision by filing four separate appeals with the Federal Court of Appeal, suggesting that the risk of further strike action may not be entirely averted.

India
Potential nationwide strike action involving 12 major ports from the 28th August was avoided when the government agreed to wage increases and additional benefits for around 20,000 port workers. Union leaders insist that the strike threat played a crucial role in securing the deal, preventing significant disruption during the peak export season.

Ongoing threats

Germany
The threat of strikes at major ports remains, as the trade union ver.di has rejected the latest offer from the Central Association of German Seaport Operators (ZDS). With the contract now expired, warning strikes have already occurred in key ports such as Hamburg and Bremerhaven. Ver.di is pressing ZDS to return to negotiations with a more substantial offer, raising concerns about potential disruptions if an agreement is not reached soon.

United States
The risk of strikes at East and Gulf Coast ports is growing, with the International Longshoremen’s Association (ILA) threatening action from 1st October. Container spot rates from Asia to the U.S. have remained high, and carriers acknowledge that a strike could sustain these elevated rates through the end of the year.

The ILA has been holding ‘wage scale meetings’ in New Jersey this week, where delegates are reviewing master contract demands and preparing strike committees from Maine to Texas in anticipation of the 1st October deadline.

East Coast port employers, represented by the United States Maritime Alliance (USMX), have stated that they have been unable to secure a meeting with the ILA but remain committed to negotiating a new agreement with the union’s leadership.

The early peak season, driven by shippers eager to front-load holiday goods, has already caused concerns about overcapacity. A strike could exacerbate these issues, leaving carriers with limited options to mitigate the impact.

As negotiations remain tense and the risk of disruptions continues to grow, businesses and supply chain managers must stay vigilant and proactive in their planning. Unresolved labour disputes could have significant consequences for global trade, particularly as the year-end approaches.

We have contingency plans in place to avoid ports likely to be most affected by strikes, as well as alternative routes and entry points. Please share your forecasts as early as possible so that we can mitigate possible issues ahead of time.

To discuss these issues and how Metro can protect your supply chain, please EMAIL Andrew Smith, Chief Commercial Officer.

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Challenges in ocean freight: Capacity, congestion, and resilience

Sep 4, 2024 | , , , , , , ,

The ongoing disruption in the Red Sea and Gulf of Aden, which started with the hijacking of a vessel nearly ten months ago, has led to a substantial reduction in available container vessel capacity, driving up freight rates, intensifying port congestion, and exacerbating equipment shortages.

The impact of this crisis, second only to the pandemic, has caused widespread disruptions, with global ocean freight continuing to grapple with significant challenges.

Blanked sailings
To counter the drop in demand and falling container spot rates, ocean carriers are implementing a high number of blanked sailings, particularly ahead of China’s Golden Week holiday. The cancellation rate for scheduled sailings in September is currently 10% across major trade routes, with the transpacific accounting for 51%, Asia-Europe 28%, and the transatlantic 21%.

Despite the recent softening, freight rates remain significantly higher than last year – +350% on the Asia-North Europe route and +150-180% on Transpacific routes. Events such as the looming threat of port strikes, the introduction of new import tariffs and an early Chinese New Year could keep rates elevated, even in the face of softer demand.

US West coast volume surge
As the peak shipping season approaches, the US West Coast ports of Los Angeles and Long Beach are preparing for a surge in import volumes.
Ocean carriers are deploying 28 additional “extra-loader” vessels to handle the expected influx, driven by strong consumer demand and the diversion of cargo from the US East and Gulf coasts due to potential labour disruptions.

Economic resilience is likely to sustain high import levels through the end of the year, further increasing activity at these key ports.

Ongoing Port congestion
Global port congestion remains challenging with hot spots in Asia and India in particular. The delivery of new container ships and fewer overall blank sailings in recent weeks, along with the Red Sea diversions, are absorbing the added capacity and demand remains high, resulting in vessel bunching and berthing delays at major ports in China, the USA and South America.

The risk of further supply chain disruptions persists, with potential threats from labour strikes and the increasing impact of severe weather events linked to climate change.

Red Sea diversions soak up equipment
Container equipment situation in Asia, and China in particular, remains challenging but is improving with India now becoming the main hotspot.
Ocean carriers and container leasing companies have booked all available container production slots at Chinese manufacturers until mid-October, following record-high deliveries earlier in the year. In the first seven months of 2024 alone, container deliveries increased tenfold compared to the same period in 2023.

The availability of 40ft high-cube containers has tightened significantly, putting additional pressure on carriers and manufacturers to meet delivery schedules amid strong export growth from Asia and ongoing port congestion.

As the industry navigates these complex challenges, the focus remains on managing capacity, stabilising operations, and mitigating the risks posed by economic and environmental factors.

Ongoing demand for ocean freight and challenges in capacity suggest a complex and potentially turbulent peak season ahead.

We recommend talking to us now, if you have high-priority orders and sharing your shipping forecasts, so that we can secure your space, on the services that meet your deadlines, at the best possible rates.
To learn how we can safeguard and enhance your ocean supply chain, please EMAIL our Chief Commercial Officer, Andy Smith. 

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