Did you know that marine traffic is experiencing one of its most significant disruptions, and it could impact you? (2024)

Navigating the choppy waters of global shipping disruption

The escalation of attacks on ships in the Red Sea has been disrupting maritime routes, which were already affected by conflict and climate change.

This year, summer clothes are arriving a couple of weeks behind schedule in the stores. The fashion industry is experiencing the repercussions of the ongoing global shipping crisis, which has been unfolding for over half a year. Fashion giants like Zara and Adidas are facing delays in deliveries to retailers due to disruptions in shipping routes.

The latest to implement measures is port operator PSA Singapore. Last week, it revealed plans to increase manpower and container handling capacity to address shipping delays caused by port congestion.

The diversion of vessels around the Cape of Good Hope has disrupted vessel arrival schedules at major ports around the world, leading to off-schedule arrivals and causing a bunching effect, a situation where several ships arrive at the same time, leading to long waiting times.

For Singapore, which has the busiest transhipment port in the world in terms of shipping tonnage, this has resulted in a significant increase in vessels since the beginning of 2024, according to a statement from the Maritime and Port Authority of Singapore.

While daily shipping traffic at the Suez Canal has halved, it has doubled at the Cape of Good Hope

A spokesperson for PSA said it remains fully committed to ensuring efficient and reliable service, and helping to mitigate the impact caused by the disruptions across various nodes in the global supply chain.

This includes activating additional berth and yard resources where possible, increasing quay crane deployment and ramping up manpower.

“Our proactive steps have alleviated the berth waiting times to between two to three days on average thus far despite the current dynamic situation, and such efforts will continue,” the spokesperson said.

PSA Singapore handled 13.36 million containers in the first four months of 2024, an 8.8 per cent increase over the same period last year. Its Tuas Port currently has eight operational berths and this is expected to increase to 11 by the end of 2024.

Cargo ships take an average of 16 more days to reach their destination

These delays are not just inconveniences; they represent a symptom of a larger crisis affecting maritime trade on a massive scale.

For the first time in history, the Suez and Panama canals have simultaneously entered into a crisis, putting international maritime transport, which handles 90 per cent of global trade, on the ropes.

Armed conflict in the Red Sea and extreme drought in Panama have forced shipping companies to alter their usual routes, increasing both time and transport costs and leading to delays. This multifaceted situation has affected supply chains, impacting industries well beyond the maritime trade.

The Suez Canal serves not only as a vital trade route between Asia and Europe but also as a significant conduit for global maritime transport. It handles 30 per cent of container transport and 13 per cent of all maritime trade, according to the United Nations Conference on Trade and Development (Unctad).

However, since late 2023, the area around the Suez Canal has become a hot spot of conflict. The crisis unfolded in November when the Houthi militia in Yemen targeted a ship in the Bab al-Mandab Strait, a critical choke point for global trade known as the southern gateway to the Suez Canal.

The name Bab al-Mandab translates to Gate of Tears in Arabic, reflecting the historically perilous waters of this passage. On Nov 19, 2023, the militants intercepted the Galaxy Leader cargo vessel in the southern Red Sea and redirected the ship towards Hodeidah port in Yemen. The crew was seized and remains in captivity.

The attacks continued unabated, prompting a swift reaction.

In response to these escalating threats, maritime transport giants like Danish company Maersk, which is considered a barometer of global trade, announced strategic measures. On Jan 5, Maersk declared that all its vessels transiting the Red Sea and Gulf of Aden would be diverted southwards, through the Cape of Good Hope. Since then, the number of ships traversing the Bab al-Mandab Strait has decreased significantly, impacting global trade and maritime operations in the region.

There have been 202 attacks in the Bab al-Mandab Strait since last November: 83 on commercial ships and the rest on military or unknown vessels

“Recent attacks and ongoing conflict in the area have raised serious concerns about the safety and reliability of this crucial waterway,” says Associate Professor Yap Wei Yim, an expert in maritime management at the Singapore University of Social Sciences.

From October 2023 to April 2024, Houthi attacks in the Red Sea occurred over 60 times, compelling hundreds of commercial vessels to reroute around South Africa to avoid becoming targets. Consequently, shipping companies are now compelled to reroute their vessels through the Cape of Good Hope, circumnavigating the African continent, which inevitably leads to increased time and costs for the journeys.

Mr Jan Hoffmann, chief of Unctad, trade facilitation section, highlights the impact of potential Suez Canal closures: “If the Suez Canal closes or has reduced capacity, container shipping needs more ships, as there is no significant alternative to going round South Africa. So maritime trade will take longer and be more costly.”

While the Middle East is hit by conflict, climate change threatens the continuity of the Panama Canal. Severe drought, exacerbated by a combination of El Nino and climate change, wreaked havoc on shipping through this vital passage in recent months.

Gatun Lake, the lifeblood of the canal, saw its water levels plummet, forcing the authorities to impose restrictions on ship transits. According to PortWatch data, by the end of 2023, the number of daily transits dropped from the usual 38 to 27, resulting in extensive queues at nearby ports as vessels await their turn. Although the rainy season has improved the situation, normal traffic has not yet been restored.

The drought has caused the Panama Canal to reduce the number of ships travelling the waterway since October 2023

The Panama Canal, a key pillar in the global economy through which nearly 6 per cent of world trade and 40 per cent of US container traffic pass, is experiencing an unprecedented bottleneck with an extremely slow traffic pace. Ships pile up while waiting to use the canal, and the congestion has reached such a point that some carriers are now paying millions of dollars to skip the line and transit through the canal.

The Panama Canal cut daily ship crossings to 27, causing longer waiting times on both sides, as seen in this January 2024 image

PortWatch, a platform jointly operated by the International Monetary Fund and the University of Oxford, indicates that the issue remains active in Panama.

Five years ago, the region experienced a 20 per cent reduction in rainfall compared with an average year, making it the fifth driest year since the 1950s. The Panama Canal Authority expects to restore regular transit by 2025, according to an April 2024 statement.

The impacts on freight rates have varied across different market segments with container shipping —responsible for transporting consumer and manufactured goods— witnessing the most significant increases.

According to Mr John Sze, managing partner at JTJB law firm, who specialises in shipping, international trade and logistics, the impact is being felt not only in Singapore but also globally, leading to increased shipping costs.

Rates for container freight from the Asia-Pacific region to Europe have surged notably since November 2023.

The price of container transport has doubled in the last six months but has not reached the levels of the Covid-19 crisis

The disruptions in the Red Sea and Suez Canal, coupled with factors related to the Panama Canal and the Black Sea, have the potential to undermine the environmental benefits gained from slow steaming, as vessels reroute and increase speeds to cover extended distances.

The lengthening of routes has also resulted in an increase in emissions. Unctad calculations estimate that the distances caused by rerouting from the Suez Canal to the Cape of Good Hope led to a 70 per cent increase in greenhouse gas emissions for a round trip from Singapore to Northern Europe.

According Prof Yap, beyond the current disruptions, the shipping fleet has the capacity to overcome the situation.

“Shipping companies are very accustomed to sudden changes and know how to adapt to them easily,” he says. “It is an extremely flexible sector.”

Maersk confirmed in May 2024 that disruptions to maritime transport caused by Houthi attacks on ships in the Red Sea were expected to last at least until the end of the year. “The risk area has expanded, and the attacks are increasingly reaching farther out to sea,” Maersk alerted.

“This has forced our vessels to extend their journeys even further, resulting in additional time and costs to deliver your cargo to its destination,” it added.

For companies like H&M, Zara and Adidas, this might result in delayed deliveries. H&M tells The Straits Times: “We are prepared that the situation may endure and are planning our flow of goods on that basis. We have many years of experience managing disruptions in product flow. We have taken actions to compensate for the temporarily longer shipping routes and are monitoring this closely day by day.”