Suez Canal reroutes have mixed impact on Singapore SMEs so far

AS CONFLICT in the Red Sea causes ships to be rerouted away from the Suez Canal, some imports from Europe to Singapore may face delays and higher costs, said industry observers – though it is still too early for all importers to be affected.

Estimates of the likely delay vary. EU-Asean Business Council executive director Chris Humphrey expects that reroutes to travel via the Cape of Good Hope will add four to five days of shipping time, with consequent cost increases.

Giacomo Marabiso, managing director of the Italian Chamber of Commerce in Singapore, expects the route via the Cape to add around 3,000 nautical miles to ships’ journeys from North-east Italy, causing a two-week delay.

Bilateral trade between Singapore and Italy was worth 3.3 billion euros (S$4.8 billion) in 2022, with 2.4 billion euros in exports from Italy to Singapore. Most of Italy’s exports to Singapore are by sea, and usually by the Suez Canal, said Marabiso.

Militant attacks by Yemen-based Houthi rebels in the Red Sea, however, have disrupted the transport of goods through the waterway.

For now, some importers in Singapore have experienced minimal disruptions.

French grocer LPB Market usually has shipments that travel through the Suez Canal. But before the recent attacks, it had already switched to air shipments in anticipation of a busier Christmas season, said store manager Rosana Ear.

The French Grocer is also minimally affected, as it works with local warehouses, said managing director Guillaume Gallet. For products received by sea, it had stocked up for 2024 before the attacks began.

But Gallet added: “I presume we could definitely be affected in the future, as some of our (local warehouse) partners will be.”

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Other importers have already been hit.

Wine distributor Asia Wine Network’s imports from France, Italy, Spain, Portugal and Austria usually travel through the Suez Canal. The company has been informed that as its shipments are taking the long route around Africa, they will take an additional 15 to 19 days to arrive.

Two shipments that were supposed to have arrived before Christmas were delayed, forcing the company to cancel sales, said founder and director Roderic Proniewski.

“We are fast-forwarding planning of orders for 2024, as we will have shipment delays,” he added.

If such issues persist, stocks will have to be bought further in advance before they can be sold, with this longer financing period putting pressure on cash flow, he noted.

Shipments have similarly been held up for Le Vigne Wines & Spirits. Particularly critical are special bottles of whiskies from Scotland, designed with dragon motifs for 2024’s Chinese New Year celebrations, said director Lewis Mitchell.

These are time-sensitive, he noted. “(If they arrive too late) for Chinese New Year, year of the dragon, you’ll have to wait 12 years...

“We are less stressed with the other wines and spirits from Europe, as they are regular top-up items and we have stocks available in Singapore, or they can be substituted with other products.”

While tracking the ship loaded with his goods, Mitchell has noticed a “confusing” situation. “It’s been standing idle, just outside Gibraltar... for the last week or so.” He is unsure whether it plans to travel around the Cape of Good Hope, or resume its journey through the Suez Canal after security arrangements have been made.

Danish shipping giant Maersk and France’s CMA CGM are resuming shipments through the Suez Canal, following US-led international military efforts to prevent attacks.

Mitchell said that information has been scarce, with shipping agents and logistics companies reluctant to volunteer updates, and only providing “estimates” in case they are unable to deliver accordingly.

He was originally informed that the shipment would arrive in end-December. This was then changed to Jan 10, then Jan 13, and again to Jan 20.

“We know that there will be extra costs (because of the delays), but nothing was said about how much,” he added.

It is neither possible to offload the products mid-voyage for alternative delivery, nor manufacture more of these custom-made whiskies, Mitchell noted. “Basically in layman’s terms, if they don’t come in, we’re screwed.”

The Red Sea attacks are a reminder of the need to build supply chain resilience, noted industry players.

“In the face of a rising tide of unprecedented events, the European Chamber of Commerce in Singapore remains vigilant in its commitment to supporting the interests of the European business community,” said executive director Nele Cornelis.

“The recent disruption at Suez Canal serves as a stark reminder of the challenges our member companies may encounter,” she added.

Asia Wine Network’s Proniewski said: “It seems that now we have to be ready for uncontrollable situations on a yearly basis.” The silver lining, he added, is that the issue affects everyone in the industry equally.

Marabiso from the Italian Chamber of Commerce in Singapore noted that it will be important to reconsider supply chains for the future, with production within the region being a sustainable and lower-risk option.