WEEK 39 TOP 5: DISRUPTION TO SUPPLY CHAIN WATCHLIST No.205

- (Following No.204) On September 27, 2024, Israeli Prime Minister Netanyahu stated during his speech at the United Nations General Assembly that Israel is determined to defeat Hezbollah in Lebanon and destroy Hamas in Gaza, with the achievement of these objectives fundamentally altering the security landscape in the Middle East. On September 26, Israeli Air Force Commander Major General Bar reported that the IDF Air Force is preparing to provide air support for a potential ground operation into Lebanon, indicating a possible escalation and regional fallout between Israel and Lebanon.

While no Houthi attacks were reported this week, the oil tanker Diligent Warrior noted that a USV approached the vessel’s starboard side near Yemen. On September 28, Houthi militants claimed they targeted the Israeli cities of Tel Aviv and Ashkelon, along with three U.S. destroyers in the Red Sea, with missiles and drones in support of Gaza and Lebanon. However, no damage was reported to the U.S. destroyers.

Freight rates have further declined this week. The Shanghai Containerized Freight Index (SCFI) dropped by 9.8%, and Drewry’s World Container Index fell by 7%, landing at $3,691 per 40ft container.

Disruption: A ceasefire appears unlikely in the near future, with escalating tensions between Israel and Hezbollah/Lebanon; Continued blank sailings across multiple shipping lanes are expected to persist

- (Following No.204) With the looming International Longshoremen’s Association (ILA) strike expected as early as October 1, the White House held a meeting on September 27, 2024, with port operators and the U.S. Maritime Alliance (USMX) to address the potential disruption. The meeting aimed to encourage negotiations between the employers and the ILA. Similar messages had been conveyed to the ILA earlier in the week, but no significant progress has been made, with both parties at an impasse over key issues such as wages and automation.

Several U.S. East Coast and Gulf Coast ports have already initiated contingency plans to mitigate potential disruptions. These measures include advising customers to retrieve containers before October 1, extending working hours before the strike deadline, and prioritizing the pickup of temperature-controlled and hazardous goods containers.

The situation is further complicated by Tropical Storm Helene, which has intensified into a Category 4 hurricane, affecting the Gulf Coast around September 27. In response, the U.S. Coast Guard Sector St. Petersburg has declared port condition Zulu, resulting in the closure of Port Manatee, Port Tampa Bay, Sarasota, and St. Petersburg ahead of the storm’s arrival.

Disruption: The likelihood of an ILA strike in early October is increasing; several ports are already closed due to the approaching hurricane

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- The Canadian Union of Public Employees (CUPE) Local 375, representing dockworkers at the Port of Montreal, held a strike vote on September 24-25, 2024, as negotiations with the Maritime Employers Association remain unresolved. The primary issues in the dispute center around wages and work-life balance, which have been contentious since the collective agreement expired on January 1, 2024.

The vote results, announced on September 25, revealed overwhelming support for strike action. On September 27, CUPE officially filed notice for a three-day strike, set to begin at 7:00 AM on Monday, September 30, and continue until 7:00 AM on Thursday, October 3. This strike will halt all operations at the two terminals managed by Termont Montreal Inc., which handle approximately 41% of the container traffic at the Port of Montreal.

Disruption: cargo delays and potential congestion at the port

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- Port-au-Prince in Haiti will shut down from September 26 to 29, following gang activity that has prevented the docking and unloading of containers. Haiti’s Caribbean Port Services (CPS) has closed off land access to its port in Port-au-Prince due to the escalating violence.

According to a Reuters report, CPS will block all land-based traffic to the port during this period. The closure is intended to allow the army and national police to secure the area. The port has been paralyzed by attacks, including shootings at ships, which have disrupted docking and container unloading.

Disruption: cargo delays and increasing risk for cargo security

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- Intermodal rail operations are experiencing severe congestion at the Kazakhstan-Chinese border crossings. According to a news report, as of September 26, there was a backlog of 55 trains waiting at the Dostyk crossing.

In response, Kazakh Railways (KTZ) has extended the ban on container traffic to Dostyk, initially set to end on September 11, through the end of the month.

Disruption: severe congestion affecting intermodal rail services through Dostyk, leading to delays in cross-border rail traffic