WEEK 47 TOP 5: DISRUPTION TO SUPPLY CHAIN WATCHLIST No.213

- (Following No.212) On November 19, U.S. Special Envoy Hochstein announced progress on the ceasefire agreement negotiation following meetings with Lebanese officials. On November 20, Hochstein continued discussions in Israel, highlighting intensified diplomatic efforts. However, skepticism persists, particularly from members of former President Trump’s team, who have raised doubts about the feasibility of a lasting agreement and questioned the genuine commitment of all parties involved. Meanwhile, the IDF has continued targeted airstrikes on Hezbollah infrastructure in southern Beirut.

On November 21, the International Criminal Court (ICC) issued arrest warrants for Israeli Prime Minister Benjamin Netanyahu, former Defense Minister Yoav Gallant, and Hamas leader Ibrahim Al-Masri for alleged war crimes in the Gaza conflict. The decision has triggered significant international division. Countries like Ireland, the Netherlands, Norway, South Africa, and Spain have supported the ICC’s actions, emphasizing adherence to international law. In contrast, the U.S., Hungary, Argentina, Paraguay, and Italy have expressed reservations or opposition, citing concerns over the legal and political implications.

On November 20, Turkey's Foreign Ministry reported that the Turkish-owned, Panama-flagged cargo vessel Anadolu S was subjected to a missile attack off the coast of Yemen by Iran-aligned Houthis. This followed an earlier attempt to redirect the vessel northward by an individual claiming to represent Yemeni authorities. While no damage to the vessel or safety concerns for the crew were reported, Turkey Foreign Ministry said that?diplomatic measures have been initiated to prevent recurrence in the region.

The Shanghai Containerized Freight Index (SCFI) dropped 4% this week, reflecting ongoing market volatility. Similarly, Drewry’s World Container Index declined by 1% to $3,413 per 40-foot container. Drewry anticipates spot rates to remain stable in the coming week.

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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- As of December 4, 2024, the European Union's Import Control System 2 (ICS2) becomes fully operational, mandating enhanced Entry Summary Declaration (ENS) requirements for all goods entering the EU, Switzerland, and Norway.

ICS2 implementation began for carriers on June 3, 2024, with a transition period allowing system and process adaptations. Starting December 4, 2024, house-level ENS filers must comply with ICS2 requirements, with full deployment across the supply chain expected by April 1, 2025.

Disruption: additional information requirements for ENS; potential border delays December 4-5 during system transition

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- On November 16, Russia's state-owned energy company, Gazprom, ceased natural gas deliveries to Austria's primary energy provider, OMV. This action followed an arbitration ruling that awarded OMV over €230 million in damages due to previous supply disruptions. In response, OMV announced plans to offset this amount against future payments to Gazprom, prompting Gazprom's decision to halt deliveries.

Austria's natural gas storage facilities are currently filled to over 90% capacity, providing a substantial buffer for the upcoming winter season. However, Austria, particularly through its Baumgarten Hub, serves as a key transit country for Russian gas to other European nations, including Italy, Germany, Hungary, and Slovenia. This supply cut could affect natural gas availability and pricing in these countries over time.

Disruption: potential increase in energy costs for the affected countries

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- From November 29 to December 1, the railway connection between Rijeka, Croatia, and In?ija, Serbia, will be closed due to scheduled construction work. Specifically, the Zagreb GK–Rijeka line will be out of service between Zve?aj and O?tarije stations. During this period, all rail cargo services on this route will be suspended.

Following the resumption of service, additional trains may be scheduled based on the capacity of the railway infrastructure in Croatia, as reported by H? railway infrastructure. These adjustments aim to minimize delays and address the backlog of shipments.

Disruption: potential delays for railway goods between Rijeka and Serbia

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- Port Louis, Mauritius, is experiencing significant cargo delays due to infrastructure limitations, with vessel waiting times reported at 6-8 days, according to Gocomet data. The situation is expected to worsen as heavy rainfall is forecast across the main island through at least November 23, potentially causing flooding and associated disruptions. Major container lines have started imposing surcharges for containers transiting through Port Louis.

Since the rerouting of Red Sea trade lanes, Port Louis has seen increased volumes. Traditionally a key transshipment hub for routes between Asia and South Africa, it now also handles trade lanes from Asia or India to Europe, further straining its capacity.

Disruption: increased costs and potential delays for goods transiting via Mauritius/Port Louis