Global strikes and weather disrupt logistics

Sea freight worldwide is still immensely constrained. The situation at the Red Sea has not shown any meaningful improvement whilst potential port strikes in the US threaten to delay sailings in the United States.

The delays and losses incurred by vessel transit around the Cape of Good Hope, rather than through the Red Sea, continue to add pressure to the global supply chain. This route incurs extended transit times and longer operating hours. Consequently, we are experiencing more vessel breakdowns and an increase of vessels in distress in our waters resulting in further delays and backlogs around our local ports.

This is in line with the global trend as we have noticed a gradual escalation of congestion at most of the major ports. The congestion is due to sea freight delays, adverse weather, strike action and ever-changing vessel routes.

A looming strike at major ports on the East and Gulf Coasts of the US - including New York - New Jersey, Savannah, and Houston - this October may cause a delay in sailings across the States.

This port strike would be disastrous for US supply chains, as the East and Gulf Coast ports handled 51% (tonnage) of the total US import cargo from Asia between January and June. US imports from Europe in particular will be effected as the East and Gulf Coast ports accounted for 90% (tonnage) of this cargo between January and July.

This will have a domino effect on global sailing schedules as shipping companies will try to minimise the impact and collateral damage by rearranging existing vessel routes. At this stage, rerouting options are extremely constrained and largely limited to eastern Canada.

We will maintain a close eye on the situation and provide alternatives as needed.

Adverse weather adds to supply chain strain

Apart from the looming strike action in the US, we also anticipate that the global supply chain will face increased strain due to the inclement weather around Southern Africa and China.

Over two hundred containers from at least five different ships have been lost at sea in recent months due to severe storms and turbulent conditions in the waters surrounding Southern Africa. Additionally, hazardous driving conditions resulting from rare snowfall led to the closure of the N3 corridor on September 21.

Coupled with ongoing port congestion and equipment failures at Durban Port, disruptions to delivery schedules are anticipated, as approximately 41,000 TEUs are currently awaiting unloading at the port.

Southern Africa is not alone in facing inclement weather, as Shanghai recently experienced its largest typhoon in over 70 years – Typhoon Bebinca.

Although Shanghai is already recovering from Bebinca, another typhoon is moving into the area from East Asia – Tropical Storm Pulasan. At this stage, operations at China’s ports continue as normal but vessel departures are currently delayed by four days, and this may impact vessel schedules and trans-shipments through Singapore. The strain from the adverse weather coincides with the upcoming holiday season in the region.

Importers are to prepare for the temporary suspension of operations in China

Global supply chains are gearing up in anticipation of the Chinese National Holidays known as the Golden Week, scheduled from 1 to 8 October. During this period, all port operations in China will be suspended. This anticipated break, along with the additional vessel capacity introduced on the South African trade route, has led to a rate adjustment resulting in a decrease of approximately + USD 200 per TEU. Consequently, more blank sailings are anticipated, which will impact schedule reliability.

The Asia to South Africa trade route continues to have uncertain vessel bookings and space availability, leading to additional delays.

Importers are urged to consider the following:

• Impact of the Chinese national holiday (Golden Week 1-8 October)
• Challenges in sea freight capacity and equipment shortages
• Potential blank sailings
• Port omissions
• Additional shipping charges (peak season surcharges / general rate increases)
• Strong air freight demand resulting from sea freight supply chain challenges and e-commerce.

Cargo volumes at OR Tambo have increased by 20% compared to the previous year. There has been a surge in global air cargo spot rates, reaching a new peak due to the rise in tonnage due to e-commerce activities from Asia Pacific.

An Investec solution to your supply chain bottlenecks

Investec has come up with a solution for transporting large volume cargo using a combination of sea and air freight, reducing the transit time from China to South Africa from 45 days to just 25 days.

Favourably, the South African Reserve Bank has lowered the country’s interest rates, the Rand is strengthening, and the South African market continues to display its characteristic resilience. Despite importer’s flexibility, transit delays persist, which Investec can help manage and shorten.

Given the extended transit times caused by unpredictable weather and port delays at both origin and destination, there is a significant impact on short-term pricing and schedule reliability.

Depending on the urgency of your cargo, we offer an alternative solution that combines both Sea and Air Freight.

This option provides a faster transit time albeit at a slightly higher premium. Rather than traditional sea freight, this alternative utilising a premium air freight product from China to South Africa reduces the average transit time from 45 days to just 25 days.

We are an import partner that stays updated on market developments; and offer importers guidance and solutions to effectively navigate logistical challenges. We combine our logistic expertise with trade finance solutions to ensure a smooth and reliable supply chain for your business.