WEEK 40 TOP 5: DISRUPTION TO SUPPLY CHAIN WATCHLIST No.206

- (Following No.205) Israel deployed ground troops to southern Lebanon on October 2, 2024, as part of a "limited, localized" incursion aimed at countering Hezbollah forces in the region. This comes after rising hostilities, including an October 3 airstrike by the Israel Defense Forces (IDF) on an underground bunker in Beirut, reportedly targeting senior Hezbollah leaders, including Safi al-Din, the presumed successor to Hassan Nasrallah. Neither the IDF nor Hezbollah have disclosed information on the outcome of the strike.

On October 1, 2024, Iran retaliated with a large-scale missile attack on Israel, launching 181 ballistic missiles in what was termed Operation True Promise 2. The attack was noted for being more effective at breaching Israeli air defenses compared to earlier Iranian drone-missile attacks. This missile barrage was in response to previous Israeli airstrikes, including the killing of high-ranking Iranian and Hezbollah leaders. Israeli Prime Minister Netanyahu vowed further retaliation, with reports suggesting that strategic infrastructure such as oil rigs or nuclear facilities could be potential targets. In a response, IRGC Deputy Commander threatened on October 4 to target Israeli energy infrastructure if any Israeli strikes are launched against Iran.

Meanwhile, the Pentagon announced on October 1 that several thousand U.S. troops, along with additional fighter jet squadrons, would be deployed to the region to strengthen security and support Israel.

On the maritime front, also on October 1, there were multiple attacks on vessels in the region. The unladen tanker CORDELIA MOON was targeted by unidentified projectiles and an Uncrewed Surface Vessel (USV), while later the bulk vessel MINOAN COURAGE was struck by a missile, an incident attributed to its proximity to CORDELIA MOON. Both vessels sustained damage but did not require external assistance and are continuing toward their next ports of call.

Freight rates continued to decline this week. The Drewry’s World Container Index dropped 5% to $3,489 per 40ft container, though there was no update from the Shanghai Containerized Freight Index due to China's national holidays.

Disruption: escalation between Israel and Hezbollah/Lebanon, continued blank sailings due to weak demand, evidenced by reducing freight rates, oil price hikes

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- (Following No.205) The ILA strike lasted for 3 days starting on October 1, 2024, causing the suspension of operations at 14 major container ports along the U.S. East and Gulf Coasts. The strike ended on October 4 after the International Longshoremen’s Association (ILA) and the United States Maritime Alliance, Ltd. (USMX) reached a tentative agreement on wage increases.

News reports indicate that a 62% wage increase over six years has been agreed upon, with further negotiations set to focus on automation issues. The Master Contract has been extended until January 15, 2025, to allow for continued discussions. All affected ports resumed operations on October 4.

Disruption: minimal berthing delays, 1-2 weeks of expected congestion as proactive blank sailings mitigated backlogs; shipping lines likely to adjust services to restore operations to the affected ports

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- The Congress of South African Trade Unions (COSATU), the country’s largest union federation, has announced a nationwide strike on October 7, 2024, in protest against unemployment.

This strike is expected to involve marches and pickets in all major cities and towns. COSATU’s spokesperson emphasized that the strike aims to highlight key labor issues affecting multiple sectors. The South African Transport and Allied Workers Union (SATAWU) is a COSATU affiliate, which represents workers in critical transport sectors, including ports, trucking, and warehousing.

Disruption: potential suspension of cargo movement and delays across logistics sectors

- Water levels on the St. Lawrence River in Canada continue to remain critically low, causing significant disruptions to cargo transport, particularly for container vessels.

As a result, carriers like MSC, OOCL, and Hapag-Lloyd have implemented low water surcharges on shipments to and from the Port of Montreal. The Canadian Coast Guard forecasts that low water levels will persist for several weeks. Reduced water levels are also limiting the tonnage that vessels can carry, further impacting overall capacity.

Disruption: increased barge costs and capacity limitations due to reduced carrying weight on vessels

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- (Following No.193) The EU Parliament concluded its vote on Chinese EV tariffs on October 4, 2024, resulting in new tariffs on electric vehicles imported from China, effective October 31, 2024, for a period of five years. The tariffs will apply in addition to the existing 10% rate and vary by brand: Tesla: 7.8%; BYD: 17%; Geely: 18.8%; SAIC: 35.3%; Other cooperating Chinese EV producers: 20.7%; Non-cooperating Chinese EV producers: 35.3%.

The EU has also allowed Chinese companies to submit price undertakings (minimum price offers) by October 30, which, if accepted, could prevent the collection of these new duties for certain brands. However, the acceptance of these offers is not guaranteed.

As per Euronews, 10 EU countries, including France, Denmark, Ireland, Italy and Poland, voted in favor of the tariffs. In the lead-up to the vote, previous news reports indicated that China might retaliate by targeting key EU industries, such as dairy (Netherlands, Ireland), brandy (France), and pork (Spain, Denmark).

Disruption: tariff increases, higher landing costs