Route reconfiguration: similarities and differences with the onset of past crises

Just as the shipping industry seemed to have left it’s Covid-19 days behind, a new crisis hits the waters in the Red Sea. And the thing with these crises is that there’s a starting date but no one knows what will come next or how the events will evolve. Because when it comes to a maritime disruption, the effects are felt worldwide quickly. Knowing these effects can help better prepare to handle them, overcoming new difficulties by creating solutions and building resilience across the supply chain. The pandemic was good practice, and this just might be the case to put those lessons to the test. That’s why at MundoMaritimo we talked in exclusive with Robert Khachatryan, founder and CEO Freight Right Global Logistics, who shared his expert insights with us on the current crisis and what it means for the Latin American shipping logistics scene.  

“The Covid-19 pandemic taught us the importance of agility and resilience in supply chain management. These lessons are crucial now, as businesses must rapidly adapt to the new challenges posed by the Red Sea crisis. This includes diversifying supply routes, enhancing digital capabilities for better tracking and forecasting, and developing contingency plans for unexpected disruptions,” the Freight Right CEO notes.

Challenges and opportunities 

Vessel rerouting is in the air –or the water, better said. Several shipping lines have cancelled their transit through the Red Sea indefinitely, which has a global ripple effect. “The Red Sea crisis may lead to the rerouting of vessels, causing congestion and delays at Latin American ports. Ports might face challenges in handling diverted cargo, especially if not equipped for certain types of goods (…) The crisis could [also] indirectly affect labor in the region due to increased workload and potential port congestion. However, direct manifestations of unrest related to the conflict are less likely unless there are significant disruptions in local operations,” says the Freight Right expert, who notes that Asia-Europe routes could see more diversion of cargo, causing increased traffic in Latin American transshipment hubs, which could lead to congestion. 

On the bright side, the increased traffic to regional ports “could present opportunities for revenue growth. However, this depends on their capacity to handle additional or different types of cargo,” adds Khachatryan, noting that time frame for conflict resolution is uncertain. “Extended disruptions could affect trade during key periods like the Chinese New Year. Latin American markets should prepare for potential fluctuations in supply and prices, affecting both import and export seasons,” he highlights, adding that the lessons of flexibility and adaptation from the pandemic call businesses to “remain flexible and adapt to changing situations. This might involve shifting to different transportation modes or exploring new supplier relationships.”

Effects of rerouting

With the current drought, the Panama Canal’s health is of concern right now, and potential excess demand to its capacities could pose an even larger challenge than the one ports could face with increased cargo volumes. “The Red Sea crisis exacerbates existing challenges posed by the Panama Canal drought. With increased rerouting, the drought's impact on vessel movement might lead to further delays and higher operational costs for shipping to and from Latin America,” Khachatryan emphasizes. 

However, the current transit reconfiguration could change the face of logistics, not just in Latin America, but all over the world. “Rerouting around the Red Sea may set a precedent for avoiding problematic routes. This could lead to long-term changes in global shipping paths, impacting safety and environmental considerations. Increased transit times and fuel consumption could raise concerns about environmental impact and efficiency,” the expert notes, highlighting the importance of “strategic adaptation to handle rerouted cargo and potential disruptions effectively.”

Three keys for ongoing adaptation

In the shipping industry, disruptions are at the turn of every corner. A “plan B” attitude is the cornerstone of permanent “survival mode,” so shifting from a temporary approach to a long-term vision is what strong resilience is about. In this vision, there are three keys for a successful ongoing adaptation process: infrastructure upgrade, technology integration, and collaboration and communication. 

Infrastructure upgrade should be a constant priority, staying ahead of the fluctuations in demand, adding flexibility to the port’s capacities. “Ports should invest in infrastructure improvements to handle increased traffic and larger vessels, reducing congestion,” Khachatryan highlights. As for technology integration, this is a fast-paced environment that poses challenges of its own, calling for through-out decisions as to which technology is best for the port’s reality today but also with enough vision and flexibility to switch to a different one if and when reality and needs change. Khachatryan suggests that “advanced technologies like AI and blockchain can streamline port operations and supply chain management, enhancing efficiency and predictive capabilities.” While establishing stronger collaboration and communication channels among ports, logistics providers, and governments can lead to better-coordinated responses to disruptions.

Looking out for safety

Piracy is the traditional form of danger out at sea. But the Red Sea crisis is beyond piracy. However, albeit the scope of each of these safety threats is different, than can both be tackled the same way. Technological solutions, international cooperation, route analysis and planning and even crisis management training for crews are all effective measures to prevent and handle dangerous situations at sea. “Implementing advanced tracking and monitoring systems can enhance route safety. Technologies like AIS tracking, satellite communication, and predictive analytics can alert ships to potential hazards. Also, strengthening international cooperation, including information sharing and joint naval patrols in high-risk areas, can enhance safety. Continuous analysis and planning can help identify safer routes. Using historical data and real-time intelligence can aid in avoiding areas with elevated risks. And lastly, regular training and drills for crew members on handling different types of emergencies, including conflict scenarios, can prepare them for unforeseen events,” Freight Right CEO emphasizes. 

By MundoMaritimo