Supply Chain Industry Insights - August 2024

Welcome to the PGL Industry Insights report for August 2024

The Houthi-rebels have struck again. Sounion, a Greek-flagged oil tanker carrying 150,000 tons of crude oil across the Red Sea, exploded when Houthi rebels attacked on August 21, with fires still visible almost two weeks later, sparking fear of environmental disaster. If a spill occurs, it could be the worst oil spill in history. The Sounion is the third vessel operated by Athens-based Delta Tankers to come under Houthi attack this month. The militants said Delta Tankers had violated their ban on "entry to the ports of occupied Palestine". The Houthis continue to target tankers, with two hit with ballistic missiles and a drone on Monday.

August has brought a surge in ocean freight rates, driven by an early peak season demand, coupled with congestion and ongoing labor issues at major ports. Despite shipping lines rolling out new vessels, the capacity is struggling to keep pace. Initially, rates are expected to stay high, but there’s some good news on the horizon - they might start to ease as the month progresses.

In Europe, we’re seeing strong import growth, particularly from China, fueled by the e-commerce boom. However, while rates from Asia to Europe remain steep, rates from Europe to other regions have seen a decline. Plus, new inland infrastructure developments in the UK are set to enhance supply chain efficiency, especially with the opening of Maersk’s inland container depot in the Midlands Freeport Zone.

But it’s not all smooth sailing - geopolitical tensions, particularly in Ukraine and the Middle East, and an above-average hurricane season in the Atlantic pose significant risks to the supply chain. These could lead to delays and increased costs across the board.

On the labor front, an order was issued on August 24 from the Canada Industrial Relations Board imposing binding arbitration between the Company and the Teamsters Canada Rail Conference. This action voided the pending strike and requires that no labor stoppage can occur during the arbitration process.

Those in the trucking industry also face some challenges. Driver shortages and rising fuel costs are driving up transportation expenses and causing delays. New emissions regulations are pressuring companies to upgrade their fleets, but the high costs and slow adoption of automation and electric vehicles are adding to the strain.

As of today the diesel benchmark price has remained steady at $4.2 per gallon, following a significant increase from last week. This stability contrasts with recent volatility in the futures market, where ultra-low sulfur diesel prices saw fluctuations.


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