While drought concerns in Central America recede and the Baltimore Port is reopening, attacks on cargo ships in the Red Sea continue, and possible future shipping disruptions are emerging putting pressure on the automotive aftermarket sector, according to a webinar with Gemini Shippers Monday. 

“At the beginning of the year, we had two major disruptions in the Israel-Hamas conflict and the Panama Canal that were affecting ocean shipping and our supply chains,” said Steve Hughes, HCS International president and CEO, during the webinar. “Just when you think these can’t get much worse, we had the Port of Baltimore disaster, which then brought us to three major disruptions affecting our supply chain in very short order.” 

The Panama Canal Authority, in a historic move, restricted crossings of the canal to 22 in January after the watershed started seeing drought conditions in October. Typically about 36-38 crossings happen daily at the canal. 

Delays from the drought caused most carriers to implement a general rate increase (GRI) or operational fees, Hughes said. 

He said conditions are improving and the Canal Authority increased the number of crossings to 27 in March. In recent weeks, it increased to 32. He added that more rain is forecast to improve the drought conditions. 

Delays are also easing from the closure of the Port of Baltimore following the collapse of the Francis Scott Key Bridge, Hughes said. 

About 850,000 vehicles go through the port every year, according to government data. Hughes said a substantial amount of automotive parts also move through the port. 

“The good news is that authorities finished removing the last remnants of the bridge last week and the channel is scheduled to be fully operational this week,” Hughes said. “Bookings for the Port of Baltimore have already returned to normal.” 

Hughes said disruptions from continued attacks on cargo ships in the Red Sea will likely continue for an unknown length of time. 

Most major carriers have canceled their services going through the Red Sea and have diverted around the Cape of Good Hope, he said. This route adds a minimum of two weeks one way and a month roundtrip. 

The additional transit time prevents ships from staying on schedule and forces carriers to add more ships into the lane to compensate, Hughes said. 

Rate increases and operations surcharges have added thousands to shipping costs because of the delay, Hughes said. He said the rates affect shipping worldwide including the Trans-Pacific to West Coast. 

Currently, space utilization is at 100%, Hughes said. He said shipments are booking four to six weeks out. 

Hughes said the delays cause a domino effect that increases the cost of goods and causes possible stock outages. 

The automotive aftermarket industry will feel the impact of the costs and shortages, Hughes told Repairer Driven News.

He said there isn’t a specific type of part that could feel the impact the most.

“It applies to everyone equally,” Hughes said. “Right now there is disruption everywhere. It is the same impact now matter what segments of the aftermarket we are talking about.”

Industry analysts expect the spillover of congestion to worsen this month and could remain difficult throughout Q3 and Q4. 

Other disruptions also remain on the horizon, Hughes said. 

The Teamsters Canada Rail Conference (TCRC), which includes about 6,000 railway workers, has also been teetering on the verge of a work stoppage, with a possible strike mid-to-late July, according to Railway Age. 

“If it comes down to a strike, this would be a significant impact on the U.S.,” Hughes said. 

He said this includes freight travel from Canada to the middle section of the U.S., such as Detroit and Chicago. 

The U.S. International Longshoremen’s Association (ILA) also has threatened to strike on the East Coast if a labor agreement isn’t reached by the end of September, Hughes said. 

“Work slowed down or strike would be devastating, obviously, to our economy and our respective businesses,” Hughes said.

Hughes said Tuesday that talks between ILA and the United States Maritime Alliance were halted Monday.

ILA says it stopped the talks after learning of automated technology being used at ports, according to Port Technology.

IMAGES

Photo Courtesy of SHansche/istock