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Red Sea effect: Port congestion causes waves for logistics industry

Red Sea effect: Port congestion causes waves for logistics industry
Red Sea effect: Port congestion causes waves for logistics industry

Dynamo Weltweit Logistik says global port congestion has reached post-pandemic highs due to Red Sea disruptions. 

Dynamo Weltweit Logistik specializes in supply chain and logistics solutions. The company has a presence in Chile, Argentina, and the US. 

“Singapore’s container port is facing its worst congestion since the COVID-19 pandemic due to prolonged vessel re-routing to avoid attacks in the Red Sea. This has led to significant delays and backups in other Asian and European ports as well.”

Why is the Red Sea important for shipping? 

The Red Sea is a crucial corridor connecting the Mediterranean Sea, the Indian Ocean, and beyond. Its strategic location gives shippers access to Europe, Asia, and Africa. The Red Sea route is the natural sailing route between these regions. 

Rerouting vessels due to the crisis hasn’t made things easier for shippers, as this route increases transit times and costs. 

Volatile freight rates 

Earlier this month, SupplyChainBrain reported freight rates were skyrocketing since the beginning of May. 

What is causing the freight rate hike? Port congestion can slow down the supply chain, reducing the availability of ships and containers, thereby driving up freight rates.

Another important aspect when it comes to shipping cargo is insurance, specifically high risk premiums. The perceived risk of navigating through conflict zones can result in increased insurance premiums. Shipping companies pass these costs onto customers, leading to higher freight rates.

Then there is the issue of shipping capacity. Some shipping companies may not be willing to sail those near conflict zones, reducing overall shipping capacity. The reduced capacity in the face of sustained or increasing demand leads to higher rates.

Solution to keep supply chain moving 

Last week, Locate2u reported on plans underway for a greenfield port in Morocco. 

What could this port mean for logistics? It could enhance Morocco’s position as a key logistics and trade hub in the Mediterranean, providing an alternative route and reducing congestion at other ports. The new development could just be the shipping industry’s saving grace right now from this global logistics ‘nightmare.’ 

The Port of Salalah in Oman also came up with a solution to keep goods moving. It has introduced a multi-modal service option as an alternative to re-routing around the Cape of Good Hope. Although the Cape route is safer, the transit time is longer. 

Photo Credit: Canva

About the author

Sharl is a qualified journalist. He has over 10 years’ experience in the media industry, including positions as an editor of a magazine and Business Editor of a daily newspaper. Sharl also has experience in logistics specifically operations, where he worked with global food aid organisations distributing food into Africa. Sharl enjoys writing business stories and human interest pieces.

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