Global shipping is disrupted again due to floods

Global shipping is disrupted again due to floods

The floods in China and Europe continue to deal a blow to global supply chains.

Heavy rains and floods have devastated many parts of Western Europe, with Germany and Belgium being the worst affected. Parts of Switzerland, Luxembourg and the Netherlands were also affected.

"This is really going to disrupt the global supply chain because rail lines are either damaged or cut off," Tim Huxley, CEO of shipping company Mandarin Shipping, told CNBC .

According to him, railway lines from the Czech Republic and Slovakia to the ports of Rotterdam in the Netherlands and Hamburg in Germany have been "seriously disrupted", causing delays in the movement of goods in and out, adversely affecting the industry. manufacturing industry.

For example, German steel giant Thyssenkrupp was unable to import raw materials due to floods. The automotive and home appliance industries will also face similar problems.

Faced with this situation, on July 16, Thyssenkrupp had to declare force majeure (an event that occurs under unforeseeable circumstances, such as natural disasters, which makes it impossible for a party to complete the contractual obligations) with customers to avoid penalties.

Several sections of the railway in Hagen, a city in western Germany, were also destroyed. In addition, it is difficult to mobilize motor vehicles for the transport of goods.

Meanwhile, flooding in Henan province (China) is worse as the province is located deep inland, has no coastline, and railway lines are paralyzed. Huxley commented, freight rates will go up. Currently, the distribution of wheat and coal has been affected. Henan is China's wheat basket, which produced 38 million tonnes of wheat this summer.

"Every week there's something wrong with the shipping industry," Huxley exclaims. In fact, shipping has been disrupted several times this year. The first is a shortage of containers, congested goods flows, and inflated transport costs when shopping demand increases in post-Covid-19 recovering economies.

Then, in April, the freight flow was blocked for nearly a week because one of the world's largest container ships crashed, stuck in the Suez Canal. This event has a huge impact because this is a busy sea route, with about 12% of the total value of global trade goods passing through.

By June, the number of Covid-19 infections in southern China also caused seaports in the region to be congested, once again causing freight rates to escalate.

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