WEEK 32 TOP 5: DISRUPTION TO SUPPLY CHAIN WATCHLIST No.198

- (Following No.197) Ten days have elapsed since the assassination of Hamas political chief Ismail Haniyeh in Tehran, and Hezbollah commander Fouad Shukr in Lebanon, sparking widespread speculation about the timing and nature of Iran's and its allies' retaliation against Israel.

On August 7, Iranian and Palestinian officials convened a meeting of the 57-member Organization of Islamic Countries in Jeddah, Saudi Arabia. During this gathering, Iran appealed for solidarity from fellow Islamic nations, declaring that it was compelled to exercise its right to self-defense. Local media coverage indicated that although participants denounced Israel, they also expressed concerns that the ongoing conflict could escalate into a broader regional war.

According to The Times of Israel on August 5, Iranian officials reported that Russia has begun the delivery of advanced air defense systems and radars, including the speculated S-400 system, following a request from Tehran to the Kremlin.

Meanwhile, on August 2, the Pentagon announced its deployment of the USS Abraham Lincoln strike group, an additional fighter squadron, and preparations to send more land-based ballistic missile defenses. The USS Wasp Amphibious Ready Group was already stationed in the eastern Mediterranean Sea. US media outlets have noted that the American military, with approximately 45,000 troops rotating through numerous bases in the region, plays a significant role. However, on August 10, USNI news reported that the USS Abraham Lincoln was dispatched to replace the USS Theodore Roosevelt, which is scheduled to return to the US.

In the past week, the Liberia-flagged crude oil tanker DELTA BLUE was attacked four times by Houthi forces while navigating through the Bab al-Mandeb and Southern Red Sea. The assaults included two missile strikes, one RPG, and one attack by an unmanned surface vehicle (USV). Fortunately, there were no injuries to the crew or damage to the vessel, which continued its journey to the next port of call.

The Shanghai Containerized Freight Index experienced its third consecutive weekly decline, falling by 2.4%. Concurrently, Drewry’s World Container Index saw a 3% reduction to $5,551 per 40-foot container this week.

Disruption: retaliation by Iran and its proxies from Lebanon, Yemen, and potentially Syria against Israel appears imminent, with no indications of a ceasefire in the near term

- An explosion occurred in a reefer container aboard the container vessel YM Mobility near the Beilun Phase 3 Terminal in Ningbo Port, China, on the afternoon of August 9. Surveillance CCTV footage, which has been shared online, timestamps the explosion at approximately 1:45 PM local time. Fortunately, there have been no fatalities reported, and the crew had been evacuated prior to the explosion.

Ocean Carrier YangMing quickly released an initial investigation report on the same day. The chemicals in the container were said as dangerous goods Class 5.2, which typically require temperature control. However, in this instance, the reefer container was being used solely as a dry cargo container because the chemicals did not require refrigerated conditions. The precise cause of the fire and subsequent explosion still needs further investigation.

At the time of the incident, the vessel was docked at the Ningbo Phase 3 Terminal, servicing routes between the Far East and the Middle East. Following the accident, operations at the Phase 3 Terminal were temporarily suspended for safety reasons.

Visual evidence from videos and photographs available online suggests that the explosion did not cause significant damage to the terminal infrastructure.

Disruption: delays for vessels scheduled to dock or depart from the Phase 3 terminal these days, although terminal operations are expected to resume shortly; carriers are likely to implement stricter controls on the acceptance of Class 5.2 cargo

- (Following No.197) After a massive protest march led by student activists, which occurred during a prolonged nationwide curfew and resulted in violent unrest in Bangladesh, Awami League (AL) party leader and former Prime Minister Sheikh Hasina resigned and left the country on August 5. The unrest has resulted in over 400 fatalities and thousands of injuries. On August 8, Dr. Muhammad Yunus, a Nobel laureate and founder of Grameen Bank, was sworn in as the chief adviser of Bangladesh's interim government, which includes several new members.

By August 9, officials had lifted the nationwide curfew and ensured that digital communications remained operational. However, isolated security incidents such as arson, looting, and vandalism continue to occur sporadically across the country. Since August 9, police officers have been gradually returning to duty, and order is being slowly restored. The manufacturing sector, Chittagong port, and other logistical facilities previously suffered labor shortages due to the curfew and street unrest, but these issues have greatly improved since August 10.

Disruption: The interim government has resumed control and operations of transportation and logistics, although sporadic disruptions like road blockades and protests continue, and severe delays in goods delivery persist due to the large backlogs accumulated over the past weeks.

- (Following No.193) Canada’s labor relations board determined that a strike would not compromise public safety but mandated a 13-day cooling-off period starting on August 9. Teamsters Canada, the rail labor union, has stated they will provide a 72-hour notice prior to any strike action. Consequently, the earliest possible date for a strike would be August 22, assuming notice is given by August 19 latest. On the same day, Canada Pacific Kansas City (CPKC), one of Canada's two main rail companies, announced that it would lock out employees on August 22 if no labor contract agreement is reached by then.

Disruption: a potential rail strike in Canada from August 22 onwards.

- According to a report by The Economics Times, India's Directorate General of Goods and Services Tax Intelligence (DGGI) has issued show-cause notices to several international airlines for alleged non-payment of goods and services tax (GST) totaling over INR 105 billion (approximately USD 1.2 billion). The airlines implicated include British Airways, Lufthansa Cargo, Oman Air, Emirates, Singapore Airlines, Etihad Airways, Saudia, Air Arabia, Thai Airways International, and Qatar Airways. The charges pertain to GST liabilities on services procured from the airlines' head offices by their Indian branches from July 2017 to March 2024. An investigation was initiated by the DGGI in August 2023, with subsequent searches conducted at airline offices in October 2023. The International Air Transport Association (IATA) has contested these claims, arguing that the imposed tax does not align with international conventions or business norms, and has requested the government to reconsider its stance.

Disruption: potentially lead to an increase in airfreight rates