Supply chains face congestion crisis following problems in Red Sea and Panama

Supply chains face congestion crisis following problems in Red Sea and Panama | Insurance Business Asia

Insurance News

Supply chains face congestion crisis following problems in Red Sea and Panama

IUMI executive committee member warns that there may be misalignment of inbound goods as well as empty equipment shortages

Insurance News

By
Abigail Adriatico

The International Union of Marine Insurers’ (IUMI) annual press conference discussed the various problems that are affecting the international supply chains, according to a report by Seatrade Maritime News.

Mariella Dauphinee, IUMI’s executive committee member, warned that the drought in Panama that has caused ships to change course through Suez, along with the crisis in the Red Sea, is causing vessels to be delayed for up to 88 days.

Neil Roberts, IUMI secretary and policy forum liaison, had stated that insurers have concluded that nothing was happening yet as they followed the elections in Taiwan and observed how China would react.

“Trade goes on as normal for now. There is a lot of speculation, but nothing has happened… there are a number of downsides for China in carrying out anything further in terms of difficulties of a military operation, the difficulties it would cause economically to China, so there is no immediate prospect of military action,” Roberts said.

However, Dauphinee had argued that the trade industry was facing a convergence of two problems as she noted that it began when the attacks by the Houthis in the Red Sea started in November.

With an export surge expected to occur before the Lunar New Year in China and Asia along with goods from the US and Europe taking two to three weeks to arrive in Asia, it is possible for there to be a shortage in delivered goods as well as empty containers, which may cause a gridlock at export terminals as well as goods missing their connections at transhipment ports.

“So, the entire [container] shipping sector could see the same misalignment of inbound goods and corresponding empty equipment shortages that could also hit Europe and the Americas, so really you have a glut of late-arriving ships on all three continents,” said Dauphinee.

The two crises were further worsened by the Ukrainian military’s move to protect international shipping along the Grain Corridor and maintain sufficient port operations in terminals in the Odessa region. Notably, the region had seen the export of more than 10 million tonnes of grain.

IUMI President Frédéric Denèfle had said that while commodity prices increased significantly during the first few stages of the war between Russia and Ukraine, as the former’s blockade of Ukrainian Black Sea exports was a cause for concern in areas that will suffer shortages such as Africa and the Middle East, agricultural commodity prices were seen to be currently stable.

“All owners sending ships into the Black Sea were able to secure insurance,” said Denèfle, noting that the Grain Corridor has seen success as there was a diminished threat from Russia’s Black Sea fleet and Ukraine was able to repair infrastructure.