The world of trade is stuck in a sea of costly red stop signs and detours.
By Lori Ann LaRocco – Multiple sources of trade data are showing the significant impact of the U.S.-Israel war on Iran and how it is going to continue to get worse before it gets better.
Over 80 percent of the world’s 454 ports mapped are deemed in critical status, 60-70 percent are severely congested, and 45-59% are considered highly congested.
“This shows the impact of the three waves of disrupted cargo,” explained Destine Ozuygur, senior market analyst at Xeneta. “The first wave was vessels already in or near the Persian Gulf when the conflict started, the second wave was vessels that departed from Asia before suspensions were announced, and the third wave is of cargo bookings currently being made.”
All of this has led to the deterioration of vessel schedules. We all know, based on history, it takes time for trade flows to get back to a “new normal” and have schedule reliability.
A total of five vessel strings carrying a total of 44,507 TEUs have been suspended as a result of this war. Four from the Far East to the Middle East (29,225 TEUs) and one from Europe (15,282 TEUs).
India, a key transshipment country, is now processing more containers. The extra flow of containers is choking up the ports.
Xeneta data shows on-time arrivals at Mundra have dropped from 44 percent to 31 percent, with more than one in three vessels arriving a week behind schedule. Nhava Sheva’s on-time rate is now 33 percent, down from 50 percent.
The stress of the war can be seen in container velocity.
An example of this hairball in trade is the port of Mundra, India’s top-performing and largest container port.
On March 19, Vizion’s TradeView platform tracked 230 containers slated to gate out. These containers took 4 days to leave. On February 25, just before the war, 1,668 containers were tracked by Vizion and took 7.62 days to be gated out.
To circumvent the container contagion, ocean carriers are making the logical decision to suspend services, update their services on other routes, and charge more. The longer routes burn more fuel, and that fuel is way more expensive. Slow steaming is also used, but it adds time to an already behind schedule.
Shippers around the world are forced to go back to the drawing board to see which budget scenario works best for them and their supply chain: the faster, more costly vessels or the slower ships.
The ripple effects of this war are just beginning, and it will take months, or in fact years, to get back to “normal”. No political rhetoric will change that.
Time is money in the business of global trade. These delays are also creating a cascading impact on manufacturing delivery.
The tight timelines on manufacturing and production all hinge on raw materials. Petroleum-based products are in over 6,000 items we either use in our homes or wear. Deliveries of petroleum, LNG, and other critical commodities that departed at the start of the war are now arriving.
This is why even if the Strait of Hormuz magically opened tomorrow and all the ports in the Middle East were deemed safe, it would take weeks for deliveries to right itself.
