<\/p>\n
You can also listen to this podcast on iono.fm here.<\/p>\n
DUDUZILE RAMELA: Security risks in the Red Sea have led to a risk-off appetite on the part of a number of businesses. However, the reopening of one of the most critical trade routes, the Bab-el-Mandeb Strait, is sending positive signals, though cautiously, with Asia-Europe container traffic sailing \u00a0via the Cape of Good Hope. And now with the reopening of the Suez we look at what this could mean for South Africa and its businesses.<\/p>\n
Vernon Sinden is head of logistics at Investec Business and Commercial Banking. Thank you very much, Vernon, for your time this morning. Why is the reopening of this canal unlikely to deliver immediate cost savings?<\/p>\n
VERNON SINDEN: Firstly, good morning to you and your listeners. Thanks for letting me talk a little bit about what\u2019s happening in the market. I think the reopening is a misperception. The reopening of Hormuz [Bab-el-Mandeb Strait] is not a full reopening.<\/p>\n
Only a few shipping lines are, starting to re-look at opening there. For example, CMA CGM \u00a0is starting to trade through. We know that Maersk is going through now. MSC is also starting to go through. So it\u2019s not a full reopening, and we won\u2019t see \u2013 in the short term, at least \u2013 that these shipping lines will stop going around the Cape of Good Hope. At \u00a0least for now.<\/p>\n
Read:
Tankers are going dark for longer to get oil out of Middle East
Brace for impact: What happens if the Bab el-Mandeb Strait closes?
War, oil and diplomacy: Is South Africa on the wrong side?<\/p>\n
However, it\u2019s mostly from Asia to Europe and vice versa, and it\u2019s very, very much commodity driven. You\u2019re looking at oil and gas, you\u2019re looking at retail and a couple of other commodities. So I think that\u2019s what\u2019s really driving it \u2013 obviously the economy.<\/p>\n
And from a South African perspective, we have to look at how it\u2019s really going to influence us.<\/p>\n
In the short term, if you\u2019re looking at the at the rate levels, at least it\u2019s not going to affect the rate levels in in the short term.<\/p>\n
And if you had to compare last year versus this year, there is a significant difference.<\/p>\n
DUDUZILE RAMELA: Tell us about that difference and that gap: \u00a0just how big is the difference?<\/p>\n
VERNON SINDEN: Yes. If you had to compare, last year a 40-foot tank container from Shanghai to Durban, it was around $4\u00a0583 on average. Now, we\u2019re talking just under $4\u00a0000 on average, and that\u2019s a R20k difference in rand value.<\/p>\n
So, so this year at least, the rates have dropped a little. But again, every year we expect this. At this time of year when it comes to peak season we\u2019re looking at supply and demand out of the Far East coming into South Africa for various reasons.<\/p>\n
DUDUZILE RAMELA: You mentioned that this waterway is partially open so traffic will be diverted via the Cape of Good Hope. That\u2019s what we\u2019re understanding from this; still not as much in terms of volume, but there will be some traffic. So there\u2019s still opportunity for South Africa.<\/p>\n
VERNON SINDEN: Yes. From a South African perspective how does it influence us? It indirectly influences us because if there\u2019s a shortage of equipment \u2013 and when I say a shortage of equipment, that\u2019s specifically like 40-foot and 20-foot containers \u2013 that\u2019s how it influences us.<\/p>\n
And then sailing schedules from the shipping lines. So, the faster that the shipping lines route via the Strait of Bab-el-Mandeb, that means that there should be a lot more schedule reliability and a lot more stability in the market in terms of the guarantee of us getting our cargo on time.<\/p>\n
At the moment there are a lot of issues in the market in terms of re-routing. And if the shipping lines decide to go via the Strait of Bab-el-Mandeb again, how that\u2019s going to influence us is that there will be fewer delays, of course, in our major trade lanes from the Far East into South Africa.<\/p>\n
Read:
Fresh risks to shipping and global trade
Southern Africa\u2019s ports miss out as global shipping routes shift
Top Africa ports miss refuel gain even as Iran war diverts ships<\/p>\n
DUDUZILE RAMELA: What should importers be planning for as the global volatility continues to evolve? We\u2019re hearing that the strikes between the US and Iran haven\u2019t stopped; in fact, they\u2019ve picked up and are being elevated.<\/p>\n
VERNON SINDEN: Yes. I think the message is quite clear for South African importers. The recommendation is to build buffers into your lead times, at least from various trades. And it also depends on where you\u2019re importing from.<\/p>\n
And then use more than one shipping line or carrier or routing option for critical cargo.<\/p>\n
And just review your insurance or war risk as well. And then for transshipment ports, really look at your sailing schedules and where you\u2019re transshipping from.<\/p>\n
And checking which carriers have unexpected surcharges I think is quite important, because surcharges are coming up, depending on the Incoterm [international commercial term]. And then the model of the trade lane.<\/p>\n
Read: The Iran war is exposing SA\u2019s dependency on diesel<\/p>\n
DUDUZILE RAMELA: Have you looked at a scenario where we see a gradual shift away from the Cape of Good Hope, and what this could mean for South Africa?<\/p>\n
VERNON SINDEN: Yes, of course. If we had to predict that that had to happen tomorrow, as an example \u2013 \u00a0there\u2019s no perception \u2013 but South Africa receives a major economic windfall from vessels sailing around the Cape of Good Hope. And the reality is more nuanced. \u00a0For ships passing around South Africa, we have missed the boat \u2013 no pun intended \u2013 because what we see is that these vessels could have refuelled, could have needed repairs from that perspective.<\/p>\n
However, if that had to stop completely, again \u2013 it\u2019s just around the sailing schedules \u2013 \u00a0in the schedule reliability we would see a massive improvement there\u00a0in terms of capacity in the market, I believe. And then, just equipment availability as well, with 20-foot and 40-foot containers being available. And there\u2019ll be more certainty in terms of our lead times.<\/p>\n
Read: Hyundai reroutes ships around the Cape as Hormuz tensions disrupt supplies<\/p>\n
DUDUZILE RAMELA: I wonder if you\u2019ve looked at other countries right along this belt \u2013 the southern tip of Africa \u2013 that have actually prepared to catch the sales instead of letting the boats go, if you will, as a result of the factors that you speak of. Just some of the issues that are not put together or logistically that we have not actually sorted out. Which countries are seeing a boost from this traffic?<\/p>\n
VERNON SINDEN: It\u2019s very, very difficult to say. I don\u2019t want to give a specific country because it\u2019s very fluid. There\u2019s disruption. One thing for certain is that with supply chain and logistics every year there will be some sort of disruption \u2013 if it\u2019s going to be weather, if it\u2019s going to be shortage of fuel, if it\u2019s going to be war risk.<\/p>\n
So, it all depends on the trade lane and the route, where it\u2019s coming from, which country can potentially benefit from these types of disruptions.<\/p>\n
But I don\u2019t believe any country would have benefitted from it directly. The only people that benefit really, to be honest, are the shipping lines because of the cost of shipping. Obviously we have seen significant increases in shipping costs because of all these disruptions.<\/p>\n
DUDUZILE RAMELA: Fair enough. Speaking of weather, El Ni\u00f1o is said to be a Godzilla El Ni\u00f1o. I know this because my mom keeps reiterating that \u2013 \u00a0stocking up and making sure that she\u2019s prepared for Doomsday.<\/p>\n
What are the preparations for that, if you will, and what are the projections in terms of the impact that this might have on supply chains?<\/p>\n
VERNON SINDEN: Yes, it\u2019s too soon to tell. It\u2019s really too soon to tell. But the biggest storyteller here for us is history, what we\u2019ve learned in the past \u2013 when we\u2019re talking about floods in certain regions, when we\u2019re talking about really bad weather in certain ports, for example Cape Town and Durban where we\u2019ve experienced floods before.<\/p>\n
Read:
Global food prices jump to highest since 2022 as risks increase
Africa faces El Ni\u00f1o with less room to weather shock, IIF says<\/p>\n
So I think it\u2019s not foreign to us here, where we\u2019ve experienced really bad or unpredictable weather. It\u2019s just how do we plan around that? What can we do? The thing is, there are \u00a0a lot of options in terms of moving cargo.<\/p>\n
Of course, if you are sea freighting cargo into South Africa, that\u2019s one thing. But what we have seen a major shift in is that a lot of clients are moving ocean freight to air freight, because of the unpredictability in the market and weather conditions and so on. So, they\u2019re ordering \u2018just-in-time\u2019. I think that\u2019s what we might potentially see more of.<\/p>\n
So if there are any major weather disruptions on the water, or near main ports, we\u2019ll see that importers will convert their shipping mostly to air freight to for just-in-time.<\/p>\n
DUDUZILE RAMELA: Fair enough. Thank you very much for your time this morning. Vernon Sinden is head of logistics at Investec Business and Commercial Banking.<\/p>\n
#Canal #reopening #businesses<\/p>\n","protected":false},"excerpt":{"rendered":"
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