Security Issues on Maritime Routes
Insecurity on maritime routes has noticeably increased due to the activity of pirates and militias in the Red Sea and the Bab el-Mandeb Strait. These threats have led shipping companies to redirect their routes along longer and safer paths, which increases both the time and cost of transportation.
Additionally, insurers have raised insurance premiums to cover the additional risks, further increasing freight costs. The situation is aggravated by the lack of a coordinated international response to combat these threats, leaving companies with few options beyond absorbing the additional costs.
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Crisis in the Suez and Panama Canals
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Suez Canal
The Suez Canal, one of the world's most important trade routes, faces significant challenges. Attacks in the Bab el-Mandeb Strait have created an insecure environment that delays the transit of vessels. Furthermore, recent incidents of accidental blockages in the canal, such as the famous Ever Given incident in 2021, have highlighted the vulnerability of this crucial waterway, causing significant disruptions to global trade.
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Panama Canal
The Panama Canal is grappling with a water crisis due to a drought exacerbated by the El Niño phenomenon. This drought has reduced the availability of water needed to operate the canal's locks, forcing the implementation of restrictions on the draft of vessels and limiting the number of daily transits. These restrictions have generated long waiting times and have forced some shipping companies to consider alternative routes, increasing transit costs and times.
Impact of "Blank Sailings" on Logistics Flow
"Blank sailings," or the cancellation of ship departures, are a tactic used by shipping companies to adjust supply to demand and maximize their profits. However, this practice has adverse consequences for the supply chain.
The cancellation of complete routes or intermediate stops causes a reduction in available transport capacity, which in turn increases freight rates due to the scarcity of space on ships. For importers and exporters, this means higher costs and difficulties in meeting delivery times, affecting planning and operational efficiency. Companies must adapt quickly to these changes, which can involve additional costs and the need to renegotiate terms with their suppliers and customers.
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What Specific Challenges Does Argentina Face in This Logistics Crisis?
In several South American countries, SMEs are particularly affected due to the inability to meet payment deadlines to suppliers established by SEDI. This hinders the consolidation of LCL (less than a full container load) cargo, which increases costs and transit times, affecting the competitiveness and operation of these companies.
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How Does the Oligopoly of Shipping Companies Influence the Maritime Freight Market?
75% of the maritime transport market is controlled by seven large shipowners, and many alliances exceed the permitted market dominance limit. This oligopoly allows shipping companies to impose conditions that can aggravate congestion and increase costs for end-users, limiting the capacity to respond to disruptions in trade routes.
Addressing these challenges requires a combination of short- and long-term solutions that include improvements in maritime security, investments in resilient infrastructure, and greater transparency and collaboration in the global supply chain.
For more details on the tensions in the logistics flow between China and South America and to discuss solutions, contact us!