Impact of Civil Unrest in Bangladesh on Ocean Container Shipping

The ocean container shipping market is facing severe disruptions due to ongoing civil unrest in Bangladesh, particularly affecting the crucial Chittagong seaport. This unrest has led to significant gridlock, bringing the port and much of the surrounding logistics to a standstill.

Key Disruption Insights:

Chittagong Port Closure: Protests have effectively shut down the port, causing major disruptions in maritime export and import supply chains. However, while disrupted, these supply chains are not completely broken.

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Supply Chain Data Analysis:

Spot Rate Spikes: A clear sign of supply chain distress is the sharp increase in spot rates paid by shippers and freight forwarders attempting to export containers from the affected region. The rate disparity between the market mid-low (25th percentile) and market mid-high (75th percentile) highlights this issue.

Rate Increase Statistics:

July 31: The rate spread on the Singapore to Chittagong route was USD 380 per FEU, with mid-low at USD 2470 and mid-high at USD 2850.

August 1: The spread surged by 424% to USD 1990 per FEU, with mid-high jumping to USD 4561 per FEU, while mid-low increased slightly to USD 2570.

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Rate Movement and Market Dynamics:

• Desperate Shippers: The surge in mid-high rates is driven by shippers willing to pay exorbitant amounts to ensure their containers are shipped. As political tensions eased slightly, the mid-high rate dropped by nearly USD 1,000, while the mid-low rate rose by USD 125.
• Global Supply Chain Impact: Although Chittagong represents an extreme case due to the severe disruption, this pattern of increased rate spreads during supply chain crises is observable globally. For example, the Transpacific trade saw a significant spread increase from USD 154 per FEU on January 14 to USD 715 per FEU on January 15, following the outbreak of conflict in the Red Sea.
• Pandemic Example: The most dramatic spread increase was during the pandemic, where the Transpacific trade route saw the spread jump from USD 216 per FEU on April 30, 2021, to USD 4299 on August 25, 2021—a staggering 1890% increase.
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Geopolitical Risks and Supply Chain Resilience:

• Incorporating Risks: The situation in Bangladesh underscores the need for shippers to include geopolitical unrest in their risk management models. According to Guy Platten, Secretary General of the International Chamber of Shipping, the global order is under significant threat due to rising nationalism and protectionism, which have negative impacts on global trade.
• Urgency for Shippers: Shippers should urgently consider geopolitical risks when planning supply chains. Once a major disruption occurs, it may be too late to avoid skyrocketing freight rates.
• Bangladesh as a Manufacturing Hub: Given the current instability, Bangladesh is unlikely to be a preferred choice for establishing new manufacturing hubs.

As ocean shipping turmoil continues, it is crucial for shippers to stay informed and prepare for potential challenges in the remaining months of 2024.

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