Singapore logistics growth slows with Red Sea attacks, Panama drought

Source: The Straits Times

SINGAPORE - Simultaneous crises in two of the world's major shipping canals have caused delays, raised costs and disrupted supply chains - and the effects were seen in a slowdown in Singapore's logistics growth in December 2023.

The Singapore Logistics Growth Index (LGI) dipped by 0.9 point to 52.4 points that month, from 53.3 points the month before. The related transport capacity index fell to 51.9 in December, from 53.6 in November.

Published by the Logistics Institute of Singapore, the index is based on data compiled from surveying logistics professionals and managements in more than 1,000 companies.

The institute's report on Jan 15 attributed the drop to slower expansion rates in the indexes of transportation and warehousing, a slower contraction in the employment index, and a faster expansion in the indexes for business volume and inventory.

Stephen Poh, director-general of the Logistics Institute of Singapore, said: "The latest LGI readings indicate rising logistics costs of the global economy. The Red Sea shipping crisis has caused sharp increases in shipping costs and delivery delays."

Drewry's World Container Index rose 15 per cent to US$3,072 per 40-foot container week on week to reach its highest level since October 2022. The cost is 116 per cent higher than the pre-pandemic (2019) average of US$1,420.

BMI, the financial research arm of Fitch Solutions, said that the Asia-Europe corridor will face the most acute delays, given the scarcity of viable alternatives to the essential Suez Canal.

BMI noted that the fastest, typical Asia-Europe route through the Suez Canal takes 25 to 30 days. The alternative route, which wends round the Cape of Good Hope in South Africa, adds around 10 days.

Houthi rebels in Yemen began attacking commercial shipping in the Red Sea in mid-November 2023 in a series of pirate raids, unmanned aerial vehicle and missile attacks.