As President Biden visited the Middle East this week, it’s clear that global involvement in the conflict between Israel and Hamas is growing. As the war escalates, many experts in the supply chain sector are weighing in on the potential effects on global logistics. With voices from FreightWaves, Bloomberg, and the International Energy Association (IEA), we’re looking into what the war between Israel and Hamas means for global logistics networks.
As Israel and Hamas continue to exchange missiles across borders, UPS has chosen to freeze all flights into Israel, citing security concerns. In a statement obtained by FreightWaves, a UPS spokesperson said, “UPS is closely monitoring the situation, and we have temporarily suspended operations in Israel, including all inbound and outbound flights, until further notice. Our focus is on safety while we work to minimize disruption to our customers.”
While UPS has suspended flights, other parcel carriers opted to continue service. DHL is flying to and from Israel’s largest airport (in Tel Aviv), while FedEx is employing third-party carriers to ensure minimal service disruptions despite the escalating violence in the region.
The IEA warns that the ongoing war could lead to instability in the oil market despite minimal impact on prices to this point. The Middle East is responsible for a third of the world’s seaborne oil trade.
“The Middle East conflict is fraught with uncertainty, and events are fast developing,” the IEA said in its monthly report. “Against a backdrop of tightly balanced oil markets anticipated by the IEA for some time, the international community will remain laser-focused on risks to the region’s oil flows.”
Microchip manufacturing is among the industries most likely to be affected by war. As a prominent operations point for chip manufacturers like Intel and Nvidia, Israel is home to many industry experts and production facilities.
“Among the Israelis kidnapped by Hamas fighters is Avinatan Or, an engineer for Nvidia,” reports Bloomberg, “Many companies also have said their employees are part of a mass call-up of army reservists, which will result in workplace disruptions.”
As the global transportation industry continues to work toward decarbonization, carriers are under increasing pressure from regulators to do their part. The EU Emissions Trading System, set to take effect on Jan. 1, 2023, will require ocean carriers to report emissions to a central governing body, which will charge the carriers for their annual carbon allowances. As a result, major carriers plan to pass this cost onto shippers in the form of “carbon surcharges,”
In a Sept. 15 statement, Maersk confirmed that the new charges will unlikely be the last. “The cost of compliance is expected to be significant and will keep increasing with the phased implementation.”
Aiming to boost efficiency in a challenging volume landscape, UPS plans to reduce services to rural areas around the United States. Shipments will spend an additional day in transit in select rural ZIP codes, except for high-priority and medical shipments.
“This affects less than one percent of our deliveries every day, so the vast majority of our customers will not experience any difference in the service they receive,” UPS said in a statement obtained by Supply Chain Dive. “We are constantly evaluating and modifying our network, and we remain committed to providing our customers with the most reliable and efficient service wherever they live and work.”
According to the National Retail Foundation’s Global Port Tracker, container volumes for 2023 have been reached, and volumes at American ports are now firmly on a downward trajectory.
“Cargo volumes will still be strong the rest of the year, but not as high as we expected a month ago,” NRF Vice President for Supply Chain and Customs Policy Jonathan Gold said in an Oct. 10 press release. “Retailers stocked up early this year as a safeguard against supply chain labor issues and are well-situated to meet consumer demand. Shoppers are spending more than they did last year, but the rate of growth we’ve seen the past couple of years has slowed and retailers are working to strike the right balance of supply and demand.”
The Mississippi River is reaching record-low water levels for the second consecutive year, with the major trade route for the American agricultural sector measured at minus-11.5 feet in Memphis on Oct. 11.
Despite the catastrophic effect upon barge shipping, the Mississippi is not alone in facing drought conditions. “The historic lows are a product of an exceptional drought — the U.S. drought monitor’s worst level — that is plaguing parts of the South and Midwest,” reports CNN. “It has spread across parts of Texas, Louisiana, and Mississippi throughout the summer and was recently included as the 24th weather disaster so far this year that has cost at least $1 billion, according to NOAA.”
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