Contents
- Introduction
- Evolving Solutions
I. Creating a land route to Surpass Houthi Attacks
II. Jordan Govt initiative on maritime support
a) Challenges
b) Solutions
III. Initiatives taken by shipping lines. - Conclusion
1. Introduction
Since Dec 2023 the red sea passage is a challenge for shipping line due to regular attacks from Houthi rebels. The situation is like a nightmare coming true for whole shipping industry and all supply chain stakeholders.
With every necessity comes a chance of innovation and every challenge gives an opportunity. We see the market adapting itself to this crisis and evolving itself with different solutions.
2. Evolving solutions
I. Creating a land route to Surpass Houthi Attacks
Few shipping lines are connecting through land to surpass the passage of Bab Al Mandab Strait. The container is being unloaded at Salalah, Oman and is taken by road to Jeddah, Saudia Arabia. This has been launched by Salalah port as a viable option for shippers and shipping lines. The transit time of 4 to 5 days. The Salalah airport has also launched the option for to and fro Air cargo movement. As per the past report of world bank – Salalah port is the world’s second most efficient port in terms of container handling. The Oman government is trying to create a synergy between its port / airport / Free zone area and other logistics infrastructure. This can be boon for Oman in long term. If shipping line moves to Salalah port , it can turn into a transshipment hub in long turn. The land route also has other options from Jebel Ali , Doha , Dammam to Jeddah. It is a better option than the route through Cape of Good Hope both in terms of cost effectiveness to transit time reduction.
II. Jordan Govt initiative on maritime support
a) Challenge – Jordan has only one port Aqaba and most of their cargo moves through Bab-Al-Mandab strait.
As per the news the Jordan Shipping Association said – the freight has increased for approx. four times for cargo coming from East + the transit time has increased substantially. This has led to a substantial reduction on exports and imports volume, If we compare the numbers of Q1 2024 with Q1 2023 the imports has reduced by 20% and exports has reduced by 29%. Below is graphical representation of data shared by Jordan Logistics Association.
Reduction for imports
Reduction for exports
Such changes in exim volume can have negative impact on economic growth for any nation and this should be dealt with utmost attention.
b) Solution
- Jordan extends exemption on customs duties and taxes from 21st Jan 2024 to 30th June 2024. This will encourage the exim cargo movement.
- The usage of land route to surpass the Bab-Al-Mandab strait to reduce cost and transit time. They should have better land connections to ports of Salah, Dubai, Jeddah from eastern side and have land connection to ports on western side like – Port said , Haifa . This should be done with having infrastructure development of roads & custom clearance at borders within planned timeframe.
III. Initiatives taken by shipping lines.
- Shipping line have increased the vessel speed to cater the needs along with meeting the vessel schedule at different ports as the transit and number of ports have increased after diverting the route through Cape of Good hope. They are coming out with adaptable vessel routes to handle both the demands and reduce the port congestion/ container pile-up at transshipment ports.
- A service like Asia to North Europe would need approx. 12 vessels in a single service to match a weekly frequency. Shipping lines are injecting vessel in these services. Fortunately, these services also give an option to shipping line to deploy vessels which were became a surplus addition to few services after covid in 2023 and were not completely utilized till now. Also, many shipping lines ordered vessel after gaining immense profit during Covid in 2020, those vessel are expected to arrive by 2024, approx. 470+ vessel overall.
- Using technology to enhance service –
- Giving options to book vessels in advance.
- Giving on-time data to customers to take actions proactively and plan the shipments accordingly.
3. Conclusion
The situation has become tough for different supply chain stakeholders – but the one who learn to grow when the tide is against the ship will flourish when tide is in favour.
Situation is still uncertain and can either change to spiral war or can be resolved with discussion between different geopolitical powers. IMO (International Maritime Organization) is working tirelessly to solve this red sea crisis issue. We discussed on few solutions above, but there will be more way out which will be identified in near future if such situation prevails
