Israel Service Suspended, Red Sea Attacks, A Look at Security, and Port of NY/NJ Upgrades.
Your weekly All-Ways round-up of Supply Chain news.
Cosco Suspends Service to Israel
Cosco, the largest Chinese shipping line that holds 11% of the trade market share, has suspended shipments to Israel through the Red Sea.
Orient Overseas Container Line (OOCL), which was acquired by Cosco Shipping Group in 2018, paused shipping via the Red Sea and has not accepted cargo going to Israel since December because of operational issues.
This decision is significant because Cosco operates some services with Israeli shipping line ZIM.
However, ZIM confirmed it will continue operating the Tyrrhenian Container Line Service, another shipping line it operates jointly with Cosco. This route connects Israel, Fos Sur-Mer (France), Genoa, and Salerno (Italy).
More than $200 billion in trade has been diverted from the Red Sea in the last few weeks.
Spiraling Situation
Carriers are choosing to divert ships away from the Red Sea as Houthi attacks persist. Although it was previously thought that only ships with connections to Israel were being targeted, it’s now apparent that any ship is at risk of being attacked.
Hapag Lloyd will also be forgoing the route. It has introduced a shuttle service to connect cargo from the Red Sea with Europe, North America, and Latin America via Jeddah, Saudi Arabia.
Maersk has put shipping through the Red Sea on hold indefinitely following another attack last Sunday when Houthi boats came within 70 feet of the Maersk Hangzhou and exchanged fire with armed guards aboard the commercial ship. The US military intervened by helicopter and eliminated three of the four boats, killing 10 Houthi rebels.
On Tuesday, the Houthis targeted the CMA CGM Tage container ship, firing two anti-ballistic missiles that landed near commercial ships.
On Thursday, a Houthi drone boat with explosives drove about 50 miles into the Red Sea before exploding mere miles away from ships in the area.
Costs Jumping, Capacity Decreasing
The unfolding shipping situation in the Red Sea has led to delayed delivery times, tightening capacity, spot rates doubling, increased costs of goods, and the risk of inflation.
Although demand isn’t so strong, the flow of containers has been disrupted causing capacity issues and price hikes -
📈Asia-US West Coast spot rates will nearly double effective January 15 to $5000 per FEU
📈Asia-East Coast spot rates have dramatically increased to as high as $7000 per FEU
📈Asia-North Europe spot rates have more than doubled to $3,193 per FEU
📈North Asia-Mediterranean has reached $5,000 per FEU
On top of the regular peak season charges, carriers are now adding a war risk charge ranging from $400 to $2,700 per FEU.
Prices will remain high through the first half of the year. It will take at least 3-4 months for pricing and capacity to stabilize once diversions stop.
United in Security
On January 3, The UN Security Council met to discuss the attacks preventing freedom of navigation in the Red Sea which is not only disrupting the 12% of global trade that passes through the area but also the delivery of much-needed humanitarian aid to Yemen.
➡️ A dozen countries are warning the Iran-backed terror group against targeting shipping lanes in the area. Iran claims to have nothing to do with the Houthi attacks.
➡️ The international naval force does not seem to be enough of a deterrent for the Houthi rebels and it will rack up a pretty large bill for participating countries.
➡️ Targeted military action is being considered with apprehension because of fear of escalating and expanding the war and because of an already fragile situation in Yemen.
In the meantime, an Iranian warship has entered the Red Sea through the Bab el-Mandeb strait. The Alborz warship has officially been operating in the area since 2009 to prevent piracy, secure shipping lanes, and other reasons.
Update for Port of NY/NJ
The Port of NY/NJ moved 644,439 TEUs of volume this November which was:
📈 7.5% higher than November 2019
📉 11% decline year over year from 723,069 TEUs in November 2022
📉 13.2% decline from October, when retailers were preparing for the holiday shopping season.
Improving the Port
The port authority will begin a $220 million on its Port Street Corridor Improvement project that should be completed in 2028 to upgrade roads and ramps leading to the main artery at Port Newark.
It will serve “as a crucial link to the New Jersey Turnpike and Interstate 78 and provides access to one of the Port Authority’s marine facilities that make up the largest and busiest cargo gateway on the East Coast,” the port authority said.
“The redesign will feature a more efficient roadway configuration with a wider turning radius, allowing for safer trucking operations to and from the Port Newark complex. The improvements will additionally offer truck drivers significant time savings while they navigate the complex, enhancing efficiency and reliability across the supply chain as well as significantly reducing carbon emissions each year.”