GlobalData’s Company Filings Analytics Trends & Signals – Q1 2024 report has emphasised how the Red Sea Crisis, a result of escalating tensions between Israel and Hamas, and the geopolitical turning points of the Panama Canal and the South China Sea are driving up shipping costs and prolonging delivery times.

“Political instability and geopolitical tensions continue to impact business operations,” noted Misa Singh, business fundamentals analyst at GlobalData.

“Regional conflicts are impacting suppliers and companies in sourcing and delivering products. The persistent tension in the South China Sea has also contributed to disruptions and as these disruptions reshape freight flow, and subsequently the supply of goods may be delayed and result in soaring shipping costs.”

The report also highlighted specific company experiences, such as Penguin International Limited, which is grappling with supply chain disruptions and increased costs from European suppliers navigating through the Red Sea.

In contrast, Airbus SE, an aerospace, defense and security company, is benefiting from the situation due to rising air freight demand and prices, driven by extended container ship voyage times through the Red Sea and Panama Canal blockages.

Shipping companies are adapting by taking longer routes around the Cape of Good Hope, Cape Horn and the Suez Canal, further straining logistical networks. These diversions, along with incidents such as the arson attack at Tesla’s Gigafactory in Berlin-Brandenburg, have led to factory shutdowns and operational delays.

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Last week, Maersk announced it would be avoiding the Red Sea route for the foreseeable future.

Additionally, the lack of rainfall in Panama has led to a reduction in the number of vessels allowed to transit the Panama Canal each day.

The restrictions are causing delays and extended lead times for goods imported from North America, as noted by SLP Resources Berhad. Meanwhile, supplies from the Middle East and Asia Pacific remain largely unaffected.

Singh concluded: “Years of disruption following the Covid-19 pandemic and geopolitical tensions have increased the vulnerabilities of global logistics. Many supply chains have become progressively more extensive and interconnected, making them susceptible to disruption and delays and companies will surely keep an eye on how things unfold.”

In February 2024, Just Style took a deeper dive into the Red Sea crisis to reveal the short and long-term implications for the global apparel supply chain.