How the Red Sea crisis is impacting Supply chains, Consumers and Climate

The Red Sea is one of the world's super critical trade routes, connecting continents through the Suez Canal. The transit accounts for more than 13 per cent of global trade and 40 per cent of Asia-Europe trade. However, this route has been under severe pressure amid Houthi attacks. Major shipping lines are now avoiding the route, forcing ships to reroute to Africa's Cape of Good Hope, which has increased shipping time by 12 to 14 days.

Impact on the shipping liner industry

The Red Sea crisis has had a paradoxical effect on the liner shipping industry. Profits are boosted despite increasing costs due to disruptions. Reduced capacity has led to higher freight rates, helping the company's bottom lines. Maersk, for example, indicated that Red Sea closures could drive higher earnings.

Impact on global oil trade

Oil & Gas shipments have been under pressure all along the Red Sea route. Till last year, around 6.0 million barrels of crude oil and petroleum products transit through the route daily. This number has been reduced by 50%, severely impacting Europe's energy supply. 

The market has seen constant price fluctuations. Insurance costs have also ballooned, rising to as high as 2 per cent, adding millions of dollars in expenses per voyage. Cargo insurance rates have also skyrocketed, making the Suez Canal route financially unviable for many shipping lanes.

Impact on consumers & climate

Global importers have absorbed rising costs so far, but prolonged instability could fuel inflation. European businesses, heavily reliant on Red Sea trade, face delays and higher shipping costs. Rising costs of essentials are already reshaping consumer preferences. Continued Red Sea attacks can deepen this crisis.

Climate costs are also mounting amid rising tensions. Rerouted ships travelling up to 60 per cent farther are burning more fuel. Carbon emissions have also increased by an estimated 40 per cent voyage. 

With no immediate solution in sight, Global shipping continues to navigate uncertainty in the Red Sea.

Leveraging FTWZs to enhance Indian Pharma Supply Chain

India’s pharmaceutical industry is a global leader, but challenges like API dependency, cold chain logistics, and regulatory complexities often disrupt supply chain efficiency. Free Trade Warehousing Zones (FTWZs) are proving to be a game changer in overcoming these challenges.

How FTWZs Boost Pharma Supply Chains:

Duty-Free Storage: Store raw materials and finished goods without paying upfront customs duties and thus optimizing cash flow.

Advanced Cold Storage: Maintain temperature-sensitive products like vaccines and biologics in state-of-the-art facilities.

Simplified Customs: Fast-track clearance and streamlined processes to reduce delays.

Value-Added Services: Enable repackaging, labeling, mitting and quality checks / inspections in a hassle free manner.

Strategic Locations: Proximity to ports and airports ensures quick and cost-effective deliveries.

Facilities like DP WORLD Free Trade Warehousing Zone are revolutionizing pharma logistics by providing cutting-edge technology and infrastructure thereby streamlining supply chains. FTWZs not only reduce costs but also enhance India’s position as a global pharmaceutical leader

Leveraging FTWZs to enhance Indian Pharma Supply Chain

India’s pharmaceutical industry is a global leader, but challenges like API dependency, cold chain logistics, and regulatory complexities often disrupt supply chain efficiency. Free Trade Warehousing Zones (FTWZs) are proving to be a game changer in overcoming these challenges.

How FTWZs Boost Pharma Supply Chains:

Duty-Free Storage: Store raw materials and finished goods without paying upfront customs duties and thus optimizing cash flow.

Advanced Cold Storage: Maintain temperature-sensitive products like vaccines and biologics in state-of-the-art facilities.

Simplified Customs: Fast-track clearance and streamlined processes to reduce delays.

Value-Added Services: Enable repackaging, labeling, mitting and quality checks / inspections in a hassle free manner.

Strategic Locations: Proximity to ports and airports ensures quick and cost-effective deliveries.

Facilities like DP WORLD Free Trade Warehousing Zone are revolutionizing pharma logistics by providing cutting-edge technology and infrastructure thereby streamlining supply chains. FTWZs not only reduce costs but also enhance India’s position as a global pharmaceutical leader.

Benefits of Free Trade Zones for Pharma Supply Chain

Free Trade Zones (FTZs) provide significant advantages to pharmaceutical companies by improving supply chain efficiency, increasing flexibility, and reducing costs in an industry that is both highly competitive and heavily regulated. Here's a detailed look at how FTZs can serve as a valuable tool for pharmaceutical supply chains:

Duty Deferral and Reduction Verta has collaborated with a client who must store inventory produced in the EU within the US until it is needed at various global locations. The team implemented a public FTZ to defer hundreds of thousands of dollars in customs duties on imported materials until they either enter the US or are shipped elsewhere for consumption. This approach has enhanced the company’s cash flow and minimized or eliminated duties on imported materials.

Streamlined Customs Procedures FTZs expedite the customs clearance process, helping to reduce delays and mitigate associated risks. Pharmaceuticals, especially those that are time-sensitive or temperature-controlled, often need to meet stringent deadlines. FTZs streamline the customs process, ensuring faster distribution and timely delivery to end markets.

Quality Control and Compliance Pharmaceutical products entering an FTZ can undergo inspection, conversion, repackaging, or relabeling before reaching the market or moving to the next stage of the supply chain. This not only leads to cost savings but also ensures compliance with global health regulations, offering flexibility to manage product quality and regulatory adherence prior to reaching consumers.

Inventory Management and Lower Holding Costs FTZs allow pharmaceutical companies to store inventory duty-free for extended periods, reducing carrying costs for high-value items, such as active pharmaceutical ingredients (APIs), that may require long-term storage. This flexibility in inventory management helps reduce costs associated with holding valuable pharmaceutical goods.

Enhanced Security and Risk Management FTZs are governed by stringent security measures and detailed record-keeping, which align with the pharmaceutical industry’s regulatory requirements. These heightened security protocols help protect valuable products, intellectual property, and sensitive data—key assets in the pharmaceutical industry.

Supporting R&D and Market Expansion FTZs can simplify the process of importing small batches for clinical trials or testing, without incurring standard import duties. This benefit is particularly advantageous for companies engaged in research and development of new drugs, offering a cost-effective and streamlined way to conduct testing before moving to full-scale commercialization.

In Conclusion, Incorporating FTZs into a pharmaceutical supply chain strategy enables companies to optimize costs, streamline operations, and maintain regulatory compliance. By strategically utilizing FTZs, pharmaceutical companies can strengthen their global competitiveness while navigating the complexities of international regulations more effectively.

 

The Changing Landscape of Ocean Alliances : Winds of Change

In 2025, the global ocean shipping alliance landscape will change with new collaborations and the dissolution of others. 

Changes to existing alliances 

2M Alliance: Maersk and MSC will end their 10-year partnership in January 2025. The 2M Alliance was one of the largest global shipping alliances, covering routes worldwide.

THE Alliance: Hapag-Lloyd will exit THE Alliance.

THE Alliance will have three members in future instead of four, following the departure of Hapag Lloyd, and will be known in future as the Premier Alliance.

GEMIMI  - A New collaboration 

Maersk and Hapag-Lloyd: Maersk and Hapag-Lloyd will form a new operational collaboration known.as GEMINI.

Other changes 

The Ocean Alliance will publish its updated shipping network for 2025.

Impact

The changes to ocean alliances are due to companies shifting toward independent operations. 

More global offering

To measure the effect of this redistribution on ports, we have analysed the services announced so far by the new alliances to find out which ports loose and which gain from February 2025 on. To do this, we have compared the services offered by the 10 shipping companies which make up the three alliances in 2024 with those they plan to provide in 2025. Certainly, MSC is no longer in an alliance, but we have opted to include it in our panorama, given the importance of its presence on the routes we are concerned with. Moreover, MSC and Premier Alliance announced in September that they would be cooperating on Asia-Europe routes.

Overall, the alliances will offer more services from February 2025 on. The different shipping companies have decided to increase the number of joint services they offer, which will increase from 17 to 24 between Asia and Europe and from 9 to 17 - virtually double - between Asia and the Mediterranean. There will be seven additional transpacific services, taking the total to 54. The number of transatlantic services has already increased, even though Premier Alliance members have yet to issue their sailing schedules for this market.

Made-in-India driverless trainset from Titagarh Rail Systems Ltd Kolkatta for Yellow Line handed over to Bangalore Metro Rail Corporation Limited

Titagarh Rail Systems Ltd. officially handed over the first Made-in-India driverless trainset for the Yellow Line to the Bangalore Metro Rail Corporation Ltd. (BMRCL) in West Bengal. The 18-km stretch, connecting Electronics City with the rest of Bengaluru city, will feature the stainless steel, fully automated train.

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The trainset, manufactured at Titagarh’s facility in Uttarpara, West Bengal, was unveiled in a virtual ceremony attended by Manohar Lal, Minister for Housing and Urban Affairs on Monday. Mr. Lal said: “As Bengaluru surpasses 1,000 km of operational metro rail, this trainset signifies a giant leap in India’s urban mobility journey.”

The trainset is expected to arrive at Bengaluru’s Hebbagodi depot by road within 15 days, according to officials from BMRCL. However, the much-anticipated opening of the Yellow Line, initially slated for December 2024, has been delayed due to setbacks in the delivery of rolling stock. While a prototype train manufactured in China arrived at Bengaluru’s Hebbagodi depot in February 2024, the subsequent delay in receiving the remaining trainsets has pushed the timeline further. Currently, two more trainsets are expected to be delivered by April 2025, with production ramping up to two trains per month by September.

The Yellow Line, connecting R.V. Road to Bommasandra, is now scheduled for commissioning in January 2025, according to a confirmation from the BMRCL last month.

According to a release by Titagarh Rail Systems Ltd., the train is equipped with advanced driverless automation (GOA4), modern interiors, and enhanced sustainability features, the trainsets promise a secure and efficient commuting experience for millions.

Stretching over 18.82 km, the Yellow Line is an elevated corridor with 16 stations, designed to improve connectivity in southern Bengaluru. It will serve key areas housing major companies like Infosys and Biocon and will intersect with the Green Line at R.V. Road Station and the Pink Line at Jayadeva Hospital Station.

However, the Yellow Line has encountered several setbacks. In 2019, the China Railway Rolling Stock Corporation (CRRC) secured a ₹1,578-crore contract to supply 216 metro coaches to BMRCL. Yet, the company struggled to meet its obligations, failing to establish a manufacturing facility in India as required by the contract. This led BMRCL to issue multiple notices to CRRC and consider encashing a ₹372-crore bank guarantee.

To address these challenges, CRRC recently partnered with Kolkata-based Titagarh Wagons to complete the delivery of the remaining metro coaches. While this collaboration has alleviated some concerns, significant delays continue to impact the project timeline.

Four Upcoming Trends in Project Logistics

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Project logistics is a specialized subset of the logistics industry that requires a fully integrated approach to the global orchestration of material flow, order management and shipment execution from multiple origins to a defined site location. It includes transportation of regular and out-of-gauge cargo (OOG) across all transport modes to deliver in full, on time and in the right sequence to support the execution of a customer's often highly complex project schedule and objectives. A ‘project’ in this type of logistics, is identified by five characteristics: it is time-definite, the supply chain is convergent, the transport solution must be seamlessly integrated across all modes of transport, the transport execution is often highly specialized or bespoke, and finally customers’ buying behaviour shows a preference for an outcomes-based, end-to-end approach, to their supply chain. 

Upcoming trends for project logistics in 2025?

Investments: Project logistics is as sensitive to freight rates as it is to politics. It serves the complex Capital Expenditure (CapEx) needs of all markets globally, and the changing dynamics between these markets that will take place next year are greatly affecting this type of transportation. When looking at the current geopolitical environment, disruptions and upcoming tariffs are set to change trade drastically in 2025, not just for import and export, but also for global investments.

Expansion in the energy portfolio: Back in 2023, energy investments were focused primarily on wind energy. One full year later, several of the large wind energy projects ran into challenges with offtake agreements, cost, mishandled tenders, etc., resulting in material delays to the project and a dampening effect on demand in some areas. Today, the energy market is seeing early indications of a mindset shift towards the large-scale viability of nuclear power, a trend that will be more visible in 2025. With more governments backing deals on nuclear power (also to fuel the ramping electricity needed now for the common use of Artificial Intelligence, ChatGPT and similar new technologies), the demand for project logistics capacity continues to grow and diversify in nearly every region of the world.

Defence-related projects: The defence market has recently seen the largest uptick in defence spending since World War Two across the EU, NATO and its allied countries, planned for 2025. A recent study by Deloitte highlights that “geopolitical tensions continued, pushing countries to increase defence spending. As per The Stockholm International Peace Research Institute, “approximately 59 countries were at war in 2022, up by 27 countries compared to 2019. As a result, defence expenditures and related projects surpassed US$2.4 trillion in 2023” adding that “these trends are expected to continue into 2025, with the potential for broad-based operationalization of many technologies”. This outlook shows intention not only for an augmented production of defence-related items but also for CapEx in investments for defence-related facilities, installations and production plants. This uptick in defence production demand will therefore add complexity for transportation capacity in the project logistics market – particularly in the shipbuilding sector as order books for new naval vessels potentially take priority over demand for heavy lift or multipurpose ships.

Modelling and simulation: A trend that was observed for 2024, advanced modelling and simulation using digital twin technologies, for instance, will continue to be relevant into the new year and will gain even more importance as project logistics will also get more complex. “The demand to get heavy and complex cargo in and out of really tight spots is only increasing these days because the locations for new projects are getting more complex to reach” states Robin Towley, Global Business Product Owner at Maersk Project Logistics. In the last 20 years, a lot of industrial areas have grown up to the point that only a limited capacity for expansion remains.