• Riskology by Infortal: Episode 32 - Seeing Red: Supply Chain Crisis

  • Sep 9 2024
  • Length: 17 mins
  • Podcast

Riskology by Infortal: Episode 32 - Seeing Red: Supply Chain Crisis

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  • Summary

  • In the latest episode of Riskology by Infortal™, hosts Christopher Mason and Dr. Ian Oxnevad discuss the ongoing crisis impacting shipping through the Red Sea. Geopolitical Risks in Global Shipping Geopolitical risks have consistently shaped global commerce, significantly impacting the shipping industry. Elections and ongoing conflicts have exacerbated an already volatile environment, impacting both national and international supply chain operations. This summer, multiple crises have underlined the magnitude of these risks, with a major focus shifting to the situation in the Middle East. The Middle East Conflict: A Catalyst for Economic Disruption One of the most recent supply chain disruptions stems from the conflict involving the Houthis in Yemen. This Shiite group, backed by Iran, has increasingly targeted shipping routes through the Red Sea, causing substantial disruptions. Such attacks have not only heightened regional instability but have also resulted in skyrocketing insurance costs for vessels. For instance, war premiums on shipping vessels passing through the region have doubled, indicating the heightened risk and operational costs faced by shipping companies. Some carriers will no longer offer coverage. These disruptions contribute to a broader economic impact beyond the shipping industry. The Broader Implications of the Houthis' Actions The Houthis' disruption of Red Sea shipping routes has led to a cascade of economic challenges. Vital routes, such as the Suez Canal, have experienced a significant reduction in trade volume, which in turn has severely impacted regional revenue generated from the canal. Alternative shipping routes, like those around the Cape of Good Hope, have become necessary, leading to increased travel distances and fuel costs. These developments delay shipments and increase the environmental costs associated with the extended routes. Such disruptions have led to systemic issues, such as the bankruptcy of ports close to affected regions. The Port of Eilat in Israel experienced such a fate in July, largely due to decreased shipping activities. These logistic challenges echo far beyond mere financial losses, influencing global shipping patterns and affecting international trade and economic stability. Conclusion Addressing the ongoing geopolitical situation in the Middle East, especially involving the Houthis, is crucial for stabilizing global shipping routes and mitigating the economic backlash. With the ripple effects already apparent in various sectors, a keen understanding and proactive approach towards these challenges could fortify global trade resilience, ultimately benefiting businesses and consumers alike. Companies must assess their long-term strategies and consider alternative markets and shipping practices to navigate this volatile landscape. The ongoing vulnerability in traditional shipping routes requires agile and innovative solutions, particularly as the market faces new pressures ahead of winter months. To avoid the impact of the crisis, you must closely examine your risk exposure and explore alternative supply chain options as needed. Resources Infortal Worldwide Email Chris Mason on LinkedIn Dr. Ian Oxnevad on LinkedIn
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