AIR CARG O WEEK


MARKET FORECAST


GEOPOLITICS & SUPPLY CHAINS: LESSONS FROM A YEAR OF CRISIS IN THE RED SEA


WRITTEN BY DAVID KOKE, HEAD OF MARKETING, BEACON


“This latest global supply chain crisis is yet another reminder of the risks shippers must contend with as they move goods around the world. ”


ince the November 2023 hijacking of British tanker Galaxy Leader, the Houthis have carried out more than 130 attacks in the Red Sea, according to the non-profit, Armed Conflict


THE TAIL END S


through the Red Sea and into the Suez Canal. A wide range of international and regional


stakeholders are working to resolve the dispute,


including


Location and Event Data (ACLED). While there is wide agreement on the need for


co-operation among countries and multilateral institutions to minimise disruptions to global trade, the Houthis’ determination has thus far inhibited any material progress. Ultimately, no one knows how long it will take for disruptions to end, or how long a return to ‘normal’ could take. This latest global supply chain crisis is yet reminder of


another the risks shippers must contend with as they move goods around the world.


What’s being done Despite


the governments and efforts of various multilateral groups, institutions


have thus far failed to create the conditions necessary to ensure safe passage of vessels


ceasefire.


which in January passed a resolution demanding a


Additionally, the International


Maritime Organization (IMO), the World Shipping Council, along with a number of regional bodies (ICS, BIMCO, GCC, EU, CMF), have jointly condemned the attacks and advocated for


cooperation security and operations. enhanced Critically, limited operational mechanisms or there


maritime are


forums for


multilateral co-operation in the region. Operation Prosperity Guardian, a United States-


led international coalition force comprising more than 20 nations, was launched in December 2023 with the goal of ensuring the safe passage of commercial ships through the Bab al-Mandab corridor. While the coalition has successfully thwarted numerous attacks through maritime security operations, the Houthis have not yielded.


The South China Sea The strategic importance of the South China Sea is made clear by the fact that almost 60% of global trade passes through it. However, the continued openness and accessibility of


the


region is constantly under threat due to territorial disputes between China, the Philippines, Taiwan, Vietnam, Brunei and Malaysia. While China has a vested interest in ensuring the continued navigability of the region given its prominent role in global shipping, tensions have risen in recent months between the Philippines and China. Should military conflict boil over in this region, global trade will almost certainly feel the impact.


The Strait of Malacca The Strait of Malacca connects the South China Sea with the Indian Ocean, and is a critical chokepoint on trade between Asia, the Middle East and Europe. Critically, the Strait facilitates the import of nearly 80% of China’s oil, and thus the accessibility of the waterway is essential to Chinese security


security observers


interests. have


speculated


International that


military conflict in the region could lead to the United States and its allies blockading access, which would also have material impacts on global trade. Alternative routes such as the Sunda Strait are, however, available and the incremental distance is far less than the current Suez Canal diversions we are seeing around the Cape of Good Hope.


the UN Security Council,


The next Red Sea The Red Sea crisis has shown the impact geopolitical conflict can have on global trade. Other strategically important waterways where similar conflicts could cause havoc for shippers include:


Beacon’s supply chain visibility and collaboration platform empowers organisations to achieve more efficient,


reliable and sustainable supply chains. 14


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