Watch: Global shipping industry has no option but pass on fast rising costs, says top Maersk official
If COVID disrupted supply chains, current surge in fuel prices piles on more troubles
Dubai: The global shipping industry has already taken a big hit from COVID-19, highly volatile fuel prices, and the ongoing geopolitical crises. Consumers the world over will be bearing the brunt of it.
About 140 ships with over 1,000 crew are stuck in the Black Sea, as those ports have suspended operations after the Russia-Ukraine crisis blew up. The world’s biggest shipping companies, MSC and Maersk, suspended container shipping to and from Russia (excluding foodstuff, medical and humanitarian supplies), joining other companies that halted operations in response to the sanctions on Moscow.
“We saw a more than 70 per cent increase in our fuel costs, and over the last eight weeks, we’ve seen those fuel costs continue to escalate,” said Christopher Cook, Managing Director, Maersk UAE. “So there is no question that this is going to have a ripple effect on the price of operating.”
“We also see that there is a lot of shortage of supply of vessels that are pushing the cost of chartering ships. So, a number of those input costs are going up. Of course, it affects all of us in the supply chain.”
Cook says that there’s a misconception that the container crisis is driven by shipping lines not giving containers. The real cause is the effects of COVID-19 on workforce at ports and warehouses. “The fact that labour can’t come into warehouses to unpack containers means that containers get stuck in yards,” he said.
Meeting ‘growing’ demand
Maersk is working on integrating its global logistics network tighter and ‘decarbonise’ supply chains. “The pandemic fundamentally changed our buying behaviour,” said Cook. “We saw a significant spike in consumer spending, and that came at the same time as the trade slowed down.”
On how Maersk is dealing with supply chain bottlenecks, Cook said, “Everything that’s available is being used. We injected more than 300,000 new containers and new capacity on ships to support this demand.
On Thursday (March 17), Maersk Kanoo UAE opened an integrated logistics centre in JAFZA.
Maersk’s customers will get single-window access to multiple logistics requirements in the Middle East. The facility adds to the existing global footprint of over 250 warehouses (85 of which were opened in 2021). The facility will cater to various types of goods in the petrochemicals, retail, FMCG, technology and automotive categories.
Maersk is in the middle of broadening as footprint in the GCC. It has established operations in Saudi Arabia with a 100,000 sq. m facility at King Abdullah port and further up the coast where they are building a 200,000 sq. m port in Jeddah. The latter port will support cold chain, ecommerce and air freight operations.
India-UAE CEPA
Talking about the landmark agreement signed between India and the UAE, Cook said, “We saw a very significant trade agreement coming into play, with nearly $100 billion worth of goods covered by it.” The agreement will also allow 90 per cent of India’s exports a duty-free access into the emirates.
The partnership aims to provide an ‘in-Kingdom’ solution to the Ministry of Defense and Royal Saudi Naval Forces, which will include the construction of defense vessels, as well as the procurement, installation, and integration of mission, combat and weapons systems, with other potential projects in the pipeline.
As a preliminary step, IMI and SAMI will engage in discussions on how best to position a future localised offering to the Saudi Armed Forces and Security Forces.