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Logistics vs. Geopolitics: Iranians Seize an Israeli Vessel, and Russia Enters the Red Sea

April 29, 2024

Global logistics has experienced heightened tensions in the last few months, especially in the Middle East, which, for all intents and purposes, are crucial routes for global logistics and supply chains. The Iranian authorities seized a cargo ship they believe was headed for Israel, putting the country on high alert, and Russia enters the Red Sea with an intentional vagueness that has left the entire world speculating.

This month’s news curation is focused on logistics vs. geopolitics. Continue reading as we explore some of the latest logistics news from across the globe.

Iranians Seize An Israeli Cargo Ship

Earlier this month, the Iranian Revolutionary Guard seized a cargo ship off the straits of Hormuz upon suspicion that it was linked to Israel. This comes as no surprise following the months of tension and continued escalation of the conflict between the two countries in the Middle East.

The seized cargo ship was operated by MSC Aries but belonged to Gortal Shipping, an affiliate of Zodiac Maritime. Zodiac is owned by Israeli businessman Eyal Ofer. In a statement from the two, MSC Aries says it is working with the Iranian authorities to ensure the safe return of its vessel, the cargo on board, and the twenty-five-man crew. For its statement, Zodiac emphatically said that the responsibility of the cargo ship and the actions taken were solely MSC Aries.

Israel’s foreign minister, Israel Katz, has accused Iran of piracy, and the U.S. pledges continued support for the nation in the face of escalating tensions between both countries. This comes even as Iran threatens to close the Strait of Hormuz if necessary to frustrate Israel's presence in the UAE.

Russian Warships Enter the Red Sea

In a stunning move a few weeks ago, Russian warships entered the Red Sea. According to the press release concerning the move, the Russian Pacific Fleet press service stated in its press release that the “performance of assigned tasks within the framework of the long-range sea campaign.”

If you are wondering what this means, you are not alone. Theories for the action range far and wide; while some claim it is in support of Syria, others claim it is a retaliatory measure against Israel. No one really knows because the reason is as vague as it gets.

However, everyone agrees that things are heating up at the Red Sea, which can mean trouble for shippers in many ways.

In late March, reports suggested that the Houthis had entered a deal with the Russian and Chinese governments, promising them safe passage if both countries leveraged their positions in the U.N. to back the group. Not too long after that, the Houthis fired on a Chinese oil vessel, although there was minimal damage and no lives lost.

Whatever the case, it seems like the recent crisis on the Red Sea, although surprising because of the length of time it has gone on, won’t be negatively impacting the spot rates for so long. This is primarily because shipping lines can accommodate reroutes.

Hapag Lloyd Predicts Early Peak Season for Ocean Shipping

According to Hapag-Lloyd’s annual report for 2023 and financial results for Q4, the ocean container market has been quite trying to find the largest steamship lines. Linear shipping revenues dropped to $19.2 billion, a 48.5% decrease from 2022. Earnings before interest, taxes, depreciation, and amortization fell by 77.1% as well in the same period.

The collapse was due to the fall of average freight rates from $2,863 per TEU to $1,500 per TEU, meaning that the carrier took much less money despite increasing its volume by 100,000 twenty-foot equivalent. The decline in revenue is an indication of the pandemic-era bubble popping. It is also important to note that despite the pop, this is still one of the most successful years in the carrier's history.

The CEO of Hapag-Loyd was a bundle of positivity when talking about this year's peak season. He suggested that rather than the typical peak season we have come to expect between September and October, the year's peak season may take off as early as the summer because inventories have been depleted worldwide, and the volumes are picking up nicely after the Lunar New Year.

Supply and Demand Imbalance Continue to Linger

Due to the surge of carriers that swamped the market at the height of the pandemic, today's trucking freight market continues to experience an imbalance between carrier supply and demand. Although many carriers have left the market, there remains a lingering effect of increased competition. Hopefully, it will all clear up sooner rather than later.

Bringing Visibility To Freight Operations Amidst Global Crisis

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