How deugro mitigates freight market uncertainties
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As we progress through the year 2024, the global freight market faces unprecedented challenges marked by geopolitical uncertainty, environmental changes and regulatory shifts. These dynamics are testing the resilience of supply chains worldwide, impacting security, labor and sourcing diversification.
At deugro, our strategic approach to risk mitigation and commitment to excellence enables us to navigate these turbulent times effectively. In this article, we delve into the key factors influencing the freight market and how deugro’s strategies ensure continued reliability and safety in project execution.
Global conflicts
The war in the Ukraine has restricted the navigability of the Black Sea, necessitating the purchase of war risk insurance for ships operating in this area. Although the overall effect on the multi-purpose vessel (MPP) market has been limited, the conflict has nonetheless introduced additional costs.
Similarly, the Houthi rebel attacks on vessels transiting the Bab el-Mandeb Strait have led ocean carriers to reroute ships around South Africa instead of through the Red Sea and Suez Canal. This alternative route adds additional days to voyages and increases ocean freight costs. The rerouted ships have created artificial capacity shortages, driving up freight rates as fewer vessels are available in key markets like the Far East.
Global supply chain disruption due to low Panama Canal water level
Extreme weather conditions, such as the El Niño-induced drought, have severely impacted the Panama Canal, leading to reduced water levels. This has caused significant congestion and delays, forcing vessels to find alternative routes. The necessity to bypass the Panama Canal has disrupted schedules and increased operational costs for logistics companies globally. At its peak, the backlog reached over 150 non-booked vessels waiting up to 21 days for transit. Although recent rainfall has somewhat alleviated the situation, the volatility remains, and slot prices have soared to unprecedented levels.
Impact of the European Union’s Emissions Trading System (EU ETS)
The upcoming implementation of the EU ETS in 2024 will add another layer of complexity to logistics operations. This system will price greenhouse gas emissions to incentivize reductions, affecting all maritime transport between EU ports and from the EU to non-EU destinations. Compliance with these regulations requires significant adjustments from shipping companies, potentially increasing operational costs and impacting global trade flows.
Labor shortages and capacity constraints
The logistics industry is grappling with significant labor shortages, particularly in the trucking sector. Many companies are facing difficulties hiring skilled drivers, which has led to increased operational challenges. Additionally, capacity constraints due to geopolitical issues and increased demand have further strained the logistics networks, leading to higher costs and delays.
How deugro mitigates freight market uncertainties:
Proactive strategic planning and risk mitigation
deugro emphasizes strategic planning and risk mitigation by closely monitoring geopolitical developments and environmental conditions. This proactive approach allows us to adjust routes and operations to minimize disruptions. For example, contingency plans for alternative routes and transportation modes are developed to ensure cargo movement remains efficient and reliable even amid significant disruptions. By understanding and assessing global supply chain risks, we can schedule shipments well in advance and plan for longer lead times.
Even when the urgency of a project must be measured in days or even hours, despite freight market uncertainties, we hold a strategic advantage by having a dedicated Air Charter team. This team possesses true market expertise, recently demonstrated by the successful delivery of nine urgent air charters between Thailand and the USA to support an urgent facility start-up.
Diversification of supply base
To mitigate risks associated with geopolitical tensions and environmental challenges, we at deugro emphasize the diversification of our supply base. This strategy involves identifying alternative suppliers and routes to ensure continuity in operations even when primary sources are compromised. Diversification enhances resilience and reduces dependency on any single supply chain route or partner.
Leveraging technological innovation with deugro visiotrack
We invest in technology to enhance supply chain visibility, optimize logistics processes and improve communication with clients. A key component of this strategy is deugro visiotrack, an advanced digital tool that provides clients with a complete overview of project data at all times.
The system offers instant 24/7 global access to information related to items and shipments via customizable dashboards, ensuring full budget control. By identifying potential cost and time savings, deugro visiotrack optimizes your supply chain and enables the proactive resolution of freight market challenges before they even arise.
Strengthening the global network and collaboration
Our extensive global network is crucial in navigating market uncertainties. Strong relationships with carriers, port authorities and other stakeholders ensure competitive capacity commitments and access to critical resources during peak times. Collaboration with local offices and partners allows us to quickly adapt to changing conditions and provide tailored solutions to clients in different regions. Our global network and collaborative efforts between local deugro offices enable us to identify cost-effective solutions and reduce risks through shared expertise and resources.
Focused customer-centric approach
Our experts’ customer-centric approach ensures you have consistent support and customized solutions. Understanding and addressing the unique needs of each client allows for more effective risk management and cost control. Working closely with you, we help you to navigate the complexities of the current logistics landscape, ensuring smooth and efficient cargo movement.
Safety and resilience take top priority
In a volatile freight market characterized by geopolitical uncertainty, environmental challenges and logistical disruptions, deugro’s commitment to safety stands above all else. This dedication has been consistently demonstrated over the past 100 years. For instance, in 2022, deugro won the Gold Safety Award for the third consecutive time, a testament to our unwavering focus on safety and excellence in logistics operations.
Our strong ability to successfully face uncertainties in the global supply chain is globally recognized. In 2023, deugro received the Resilience Award at the Energy Industries Council Regional Awards in London. This award celebrates our company’s remarkable ability to adapt and recover quickly from challenging market pressures and events.
As we navigate significant uncertainties in the global supply chain, including the impacts of geopolitical tensions, environmental disruptions and regulatory changes, maintaining a strong culture of health and safety is more crucial than ever. deugro’s ability to identify freight market risks is integral to our resilience. By implementing stringent safety protocols and leveraging advanced risk assessment tools, we ensure that all stakeholders—employees, clients and partners—are protected.