Ethiopian Freight Forwarders and Shipping Agents Association

EFFSAA Weekly Newsletter Vol. 02 No. 101

Update on Red Sea / Gulf of Aden: Reopening bookings to and from Djibouti

Maersk is pleased to announce that we have resumed our acceptance of new bookings to and from Djibouti. While we are pleased to inform you of the reopening, the situation in and around the Red Sea / Gulf of Aden, including the Bab-El-Mandeb strait remains at a volatile level, with all available intelligence at hand confirming that the security risk is at a significantly high level.

We continue to monitor the situation in and around the Red Sea and will keep you informed of any changes to your shipments, should they occur.

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Djibouti prohibits NVOCCs as Multimodal Operators

Djibouti’s regulatory body announced that non-vessel operating common carriers (NVOCCs) are not permitted to serve as multimodal operators in Djibouti, even though the Ethiopian government only approved the entry of three more participants a week ago.

For almost 13 years as a VOCC, Ethiopian Shipping and Logistics (ESL), a state-owned operator of deep sea vessels on the continent, has been the only multimodal. Recall that the Ethiopian government has authorized the participation of three more NVOCC operators in the scheme, in addition to the already established ESL.

However, according to a notice released on Sunday, March 17 by the Djibouti Ports and Free Zones Authority (DPFZA), the port authority that owns and oversees the logistics activity in Djibouti, a bill of lading (BL) issued by NVOCCs is not acknowledged within Djibouti Ports and Corridors due to their legal status.

Furthermore, the notification, which is signed by Aboubaker Omar Hadi, Chairman of DPFZA, states that NVOCCs may not guarantee the complete payment of logistics chain costs along the corridor, posting concerns regarding security, traceability, and accountability.

“In adherence to our regulations and policies, BLs issued by multimodal transport operators, specifically by shipping lines, are the only legally recognized documentation for cargo transport operations within Djibouti ports, free zones, and corridors,” the notice continued.

It emphasized the need for anyone working in the logistics industry to follow the rules.

The letter made it clear that “observing these guidelines is imperative for all entities involved in maritime transport and logistics activities to avoid any operational disruptions within Djibouti ports, free zones, and corridors.”

Experts predicted that the newly chosen multimodal transport companies would find it difficult to start their operations in light of the new notice.

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ESL to Increase Fleet to Fill the Gap at Red Sea

Ethiopian Shipping and Logistics (ESL) announces its intention to increase the number of ships at the main Ethiopian cargo lifts in order to fill the void created by certain international operators who are downsizing their fleet to the Red Sea.

According to the firm, vessels operating in Djibouti have reduced their activities and, in some cases, completely suspended their operations at the main port for Ethiopian goods due to security concerns in the Red Sea region.

ESL reports that large ship operating firms, who have slot agreements with ESL to carry import cargoes, have scaled back on their trips to Djibouti and some have even ceased operations.

Regarding the export industry, ESL stated that Ethiopian cargo, especially the transportation of coffee beans, has encountered difficulties due to inadequate ships loading from Djibouti.

Using its own ships, ESL has sent 401 TEU containers to ports in China, India, and the United Arab Emirates in the first nine months of the current budget year. Equipped with 10 ships, ESL is the sole deep-sea vessel operator in Africa.

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Impact of Red Sea Attacks: African Nations Brace for Inflation Surge

Impact of Red Sea Attacks: African Nations Brace for Inflation Surge
Impact of Red Sea Attacks: African Nations Brace for Inflation Surge

African countries are poised to experience heightened inflation levels and sustained interest rate tightening throughout 2024 due to disruptions in global trade caused by attacks on shipping lines in the Red Sea by Houthi Rebels. This prognosis is outlined in a comprehensive report compiled by Afrexim bank, examining the repercussions of the Red Sea attacks on African trade and macro-economic stability.

The report underscores the mixed impact of the global trade disruption across the continent, with Egypt facing a notable reduction in traffic around the Suez Canal, while South Africa grapples with increased traffic and port pressure due to vessel rerouting through the Cape of Good Hope. Furthermore, the surge in freight costs is expected to permeate consumer goods prices across Africa, exacerbating already elevated inflation levels and potentially prompting further interest rate hikes by Central Banks, which could impede economic growth.

It’s crucial to note that the Red Sea serves as a vital global trade route, accounting for approximately 15% of global shipping traffic, connecting Europe, the Middle East, and parts of Africa. Since November 2023, Houthi Rebels have targeted commercial ships in response to Israel’s actions against Palestinian civilians, resulting in significant disruptions in international trade and the suspension of transit operations by major shipping companies like Maersk, Hapag-Lloyd, and MSC.

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Red Sea Conflict Continues to Weigh on Logistics Sector

Kenanga Research remains “neutral” on the seaport and logistics sector’s prospects, as the Red Sea conflict continues to disrupt Asia-Europe trade.

Roughly a third of global container volume comes from the Asia-Europe route, but the prolonged conflict in the Middle East, with no immediate sign of the Red Sea tensions de-escalating, is weighing down on the Asia-Europe trade, the research house said.

The diversion from the Suez Canal to the Cape of Good Hope, marks a longer voyage for the Asia-Europe route and reduces the frequency that shipping services could make at Westports Holdings Bhd (and all other ports in the region), the research house added.

The World Trade Organisation (WTO) said that it is cutting its current projection of 3.3% growth in global merchandise trade volume in 2024.

“The lower water levels in the Panama Canal due to an extreme drought is also disrupting the movement of shipping liners,” said the WTO.

Meanwhile, the research house acknowledged that global trade will have to navigate stricter regulations on carbon emissions.

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Red Sea Global Trade Disruptions: How to Overcome the Chaos

Red Sea Global Trade Disruptions - How to Overcome the Chaos
Red Sea Global Trade Disruptions – How to Overcome the Chaos

The Red Sea crisis is a wake-up call for companies to localize their supply chains. Shippers should have alternative sources of raw materials so they don’t have to rely on a single source for raw materials, which can make the supply chain vulnerable to disruptions. Having multiple sources allows shippers to negotiate better prices and hedge against sudden price increases from a single supplier. Because of the instability of the times, the availability of raw materials can be affected.

Utilizing technology, such as tracking devices, predictive analytics, and communication systems, can help shippers better navigate high-risk areas and respond effectively to incidents.

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Cargo Transport Crisis as Trucks Stay Grounded Over Container Height Rule

Cargo Transport Crisis as Trucks Stay Grounded Over Container Height Rule
Cargo Transport Crisis as Trucks Stay Grounded Over Container Height Rule

Several trucks are stuck in different yards in Mombasa amid delays by the Kenya National Highway Authority (KeNHA) to issue permits for special cargo containers above 4.5 metres high.

KeNHA has implemented a new rule that prohibits truckers from carrying standard 40-foot-high cube shipping containers that exceed the height of 4.3 meters.

Transporters now say that delays in granting permits for special cargo containers of above 4.5 metres have affected their operations and the government risks losing business to Tanzania.

KeNHA maintained that only trucks that comply with the East Africa Community (EAC) Vehicle Load Act 2016 will be allowed on Kenyan roads. “EAC vehicle load Act puts the maximum overall height of vehicles at 4.3 metres unless it is an abnormal load, which is allowed, subject to the authority granting an exemption permit which gives conditions on times of travel and routes to be followed, to protect public safety and road-related infrastructure,” the agency said in a statement.

According to the Act, the maximum overall length of vehicles should be 12.5 meters for rigid vehicles, 17.4 meters for articulated vehicles, and 22 meters for combination vehicles.

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