The Reshaping of Global Supply Chains

Global supply chains have witnessed significant stress over hte last 6/7 years. First with COVID 19 pandemic, to the Russian Invasion of Ukraine and now the crisis in the Persian Gulf. Each one of these events was was historic in its own right, to have three in such a short amount of time is unique to history. The Iran War has distrupted a critical global chokepoint with the Strait of Hormuz, this in turn has seen a rapid increase in fuel costs, fertilizers, and chemical products. With logistics costs rising 30% in the month of Marhc alone the ability to transport goods via Ship is increasingly expensive. Companies are beginning to engage in serious diversification of their supply chains in order to minimise the negative effects of, this points to a longer term reset rather than bracing for short term shocks.

The war in the Iran has ripped through global transport networks intensifying existent pressures on freight markets already dealing with the hangovers of the COVID 19 pandemic and the War in Ukraine. The effective closure of the Straight of Hormuz - a key global supply route and strategic choke point has resulted in between 20 - 25 million barrels of oil per day not transisting the strait along with the other products that are from Oil & Gas in the Middle East. The net effect of these developments are. Higher prices, Capacity constraints, Longer journeys & Increased uncertainty.

Companies are responding with tactical and strategic adjustments, with Brunswick International being at the fore front of the response for our customers. At Brunswick International we are providing our customers with a range of options to limit their exposre to these external shocks. Firstly we are providing our customers with alternative routes these predominately go through Turkey and Azerbaijan and Central Asia to China and vice versa. The use of Transcontinental Rail Freight enables our customers to miss global choke-points such as the Red Sea and the Persian Gulf. While not carrying the same amount of freight as a Cargo Ship- Rail Freight still allows for consistent large volume shipments over trans continental distances. Secondly as part of the wider industrial recallibration the Major Carriers are issuing emergency freight subcharge notices suspending bookings through risk corridors and recalibrating their risk profile to reduce exposure. Brunswick International freight is working with our Carrier partners to ensure that freight is moved in as safe and efficient manner possible.

A key question for Freight planners is this a temporary shock or more structural realignement of the Freight and Transporation sectors. The answer to that question depends entirely on what happens with the conflict in the Middle East, if peace comes quickly and confidence returns to routing through the Gulf, freight markets could retrace some of the recent surges as carriers re-enter key routes and insurance premiums ease. But if the Strait of Hormuz remains effectively closed for a prolonged period, higher war-risk costs, longer voyage distances, and entrenched route diversions could become embedded features of global logistics economics.