WEEK 46 TOP 5: DISRUPTION TO SUPPLY CHAIN WATCHLIST No.212

- (Following No.211) The U.S., with reported backing from Israeli Prime Minister Netanyahu, proposed a ceasefire agreement on November 14 to address ongoing tensions between Hezbollah and Israel. According to the Washington Post and other sources, the proposal is viewed as a diplomatic move in anticipation of U.S. President-elect Donald Trump's inauguration. However, the plan has faced domestic criticism in Lebanon for potentially infringing on national sovereignty, while Iran has indicated its willingness to support Lebanon's government in negotiating the terms. Discussions are ongoing, and the final agreement remains under negotiation.

The U.S. administration's October deadline for increased humanitarian aid to Gaza passed without action on November 12. The deadline, outlined in an October 13 letter by U.S. Secretary of State Blinken and Defense Secretary Austin, urged Israel to improve access to food, medicine, and essentials for Palestinian civilians in northern Gaza, warning that continued military support could be reconsidered if conditions did not improve. Despite the lapse of the deadline, aid deliveries to Gaza in October significantly declined, with a UN-backed report warning of famine risks in northern Gaza. The U.S. has maintained its military support for Israel, citing ongoing complexities and diplomatic discussions.

No Houthi attacks on commercial vessels have been reported over the past week. However, Houthi forces targeted two U.S. destroyers, and on November 9, the bulk vessel S Line reported suspicious activity involving a VHF hail from an alleged Yemeni authority.

The Shanghai Containerized Freight Index (SCFI) declined by 3.4% this week, ending a brief three-week growth streak.

Drewry’s World Container Index remained stable at $3,440 per 40ft container compared to $3,444 last week. However, spot rates on the Asia-Europe route are expected to increase, as carriers have announced General Rate Increases (GRIs) effective mid-November.

Disruption: possible ceasefire agreement between Israel and Lebanon before Trump's inauguration on January 20; continued rerouting away from the Red Sea transit likely due to limited progress in the Israel-Gaza conflict

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- (Following No. 211) On November 12, Canada’s Labor Minister MacKinnon announced measures to address recent disruptions at key ports, including Montreal, Vancouver, Prince Rupert, and Fraser-Surrey. Maintenance operations in Vancouver, Prince Rupert, and Fraser-Surrey resumed on November 14, with vessel operations resuming on November 15. At the Port of Montreal, the Canadian Industrial Relations Board (CIRB) issued an order on November 14 for operations to resume effective 7:00 a.m. local time on November 16. Rail operations to and from these ports by CN and CPKC have also resumed, although significant backlogs remain. Some shipping lines have introduced congestion surcharges (CGS) in response to the delays.

Unions representing dockworkers in Montreal and locked-out workers in British Columbia have announced plans to challenge the federal government’s binding arbitration decision. This follows the Labor Minister’s November 12 directive to the CIRB to end the work stoppage. The CIRB is scheduled to meet with involved parties on November 18 to address responses under the Canada Labour Code.

Disruption: port operations have resumed, but congestion and delays are expected to persist due to backlogs, alongside increased costs from surcharges.

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- A significant change in weather patterns is forecasted for Germany and the UK starting November 17. In Germany, temperatures are expected to drop sharply, with daytime highs ranging from -3°C to +3°C and nighttime lows potentially reaching -15°C in snow-covered regions. The weather will transition from foggy conditions to heavy clouds, with intermittent rain or snow, particularly in areas south of Cologne and Saxony. In the UK, strong winds and potential snowfall are expected, particularly in northern regions.

Disruption: potential delays in domestic road and barge transport, with adverse weather conditions potentially affecting port operations.

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- The Paraguay River is experiencing historically low water levels, the lowest in over 120 years. The drought, which began earlier this year, has intensified, with water levels at the Port of Asunción dropping to 89 cm below the benchmark in September 2024.

This has significantly disrupted barge services along the river, affecting trade to and from key ports, including Asunción, Villeta, Concepción, and Pilar. Poor rainfall in the river basin is expected to prolong the drought until at least December 2024. In response, several shipping lines have introduced low water surcharges on goods to and from Paraguay.

Disruption: rising costs for goods to/from Paraguay and potential delays due to reduced barge capacity.

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- On November 15, China’s Ministry of Finance announced adjustments to export tax rebates for various products, effective December 1.

The rebate rate for certain refined oil products, photovoltaics, batteries, and specific non-metallic mineral products will be reduced from 13% to 9%. Export tax rebates for aluminum and copper products, as well as chemically modified oils and fats, will be fully canceled.

Disruption: reduced supply and potentially higher procurement costs for affected products, particularly aluminum-based goods.