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Taiwan Strait missile testing may cause supply chain delays

Categories: Supply Chain.

With the supply chain already experiencing numerous disruptions from China’s port closures to the Ukraine-Russia conflict, rising tensions between the U.S. and China could make matters worse for shippers and ecommerce firms.

Missile tests and naval operations performed by the Chinese military may limit trade in one of the world’s busiest shipping channels. This upheaval has the potential to cause big problems for international shippers and carriers in the weeks — or months — to come.

What is happening in the Taiwan Strait?

China is conducting live-fire military exercises and drills in the Taiwan Strait and around Taiwan. These operations often breach Taiwan’s territorial waters, and could block busy shipping lanes around the island.

To make matters worse, the exercises are being held close to major ports such as Keelung, Su-ao, Taipei, Kaohsiung, Anping, Hoping, and Hualien. China is warning foreign planes and ships to stay far away while the military exercises proceed — effectively creating a soft blockade around Taiwan.

So, what’s the potential impact?

The full implications of these disruptive exercises are still yet to be determined. If the exercises continue, everyone will have to divert around Taiwan, increasing the length of voyages and leading to increased costs.

This would hurt cargo shippers considerably — while also giving a boon to select ship owners and operators as freight rates go up. Delays would increase transit time and reduce vessel capacity, and could lead to short-term supply disturbances stateside.

As FreightWaves notes, “Bloomberg calculated that almost half of the world’s container ships and 88% of larger container ships transited the Taiwan Strait this year.” Diverting that amount of traffic will impact route planning and lead to higher fuel costs. It could also cause increased delays and impact semiconductor and chip production, as well as natural gas imports/exports.

Conclusion

From where we sit now, a lot is still up in the air. This latest bout of saber rattling could create disruptions that fizzle out, or could ratchet up tensions to cause disruptions for months. Hopefully, this will be a short-lived disruption, and we will be keeping an eye on any updates.

When faced with unexpected challenges, it helps to have the right partners to ensure your shipments arrive on time, where they need to be. Partnering with a 3PL at the Port of Los Angeles and Long Beach will offer the expertise you need to streamline your drayage operations, including port-side warehousing to help you more effectively manage imported stock.

Be ready in an uncertain world. Contact Globecon today.