Attacks in the Red Sea and drought in Panama disrupted supply chains, slowing Singapore’s logistics growth.
The Logistics Growth Index (LGI) in the country fell 0.9 points to 52.4 points in December 2023 from 53.3, according to the Logistics Institute of Singapore. The related transport capacity index also fell to 51.9 in December 2023 from 53.6 in the previous month.
The institute added that the decline was due to slower growth in the transport and warehousing indices, slower declines in the employment index, and faster expansions in the business volume and inventory indices, the institute said in a report on January 15.
"The latest LGI figures show that logistics costs are rising in the global economy. The Red Sea shipping crisis has caused shipping costs to rise sharply and created delays in deliveries," said Stephen Poh, CEO of the Logistics Institute of Singapore.
Meanwhile, shipping consultancy Drewry's World Container Index has risen 15% to $3,072 per 12-metre container - its highest since October 2022. This is also higher than the pre-pandemic average of $1,420.
BMI, the financial research arm of Fitch Solutions, said the Asia-Europe corridor will face serious delays due to the scarcity of viable alternatives to the Suez Canal. The organisation noted that the typical Asia-Europe route, via the Suez Canal, takes 25 to 30 days. The alternative route around the Cape of Good Hope in South Africa will take about 10 days longer.
Yemen's Houthi rebels began attacking commercial vessels in the Red Sea in mid-November 2023. This caused transit trade through the Bab el-Mandeb Strait, which connects the Red Sea to the Indian Ocean, to fall by 42.6% from 5.2 million tonnes on December 1, 2023 to 2.8 million tonnes on January 8, 2024.
Experts say the Red Sea crisis will have a "domino" effect on other shipping routes and global manufacturing supply chains if the situation is not resolved soon. This is accompanied by a sharp increase in shipping costs from Asia to the US.
For Asia-US trade, the main alternative route via the Panama Canal is also not going well. Panama has been facing drought for months as a strong El Nino weather phenomenon has caused low water levels, although rainfall may improve in January.
