Annual Risk Report 2020Everstream Team
2019 was a tumultuous year and the supply chain risk landscape over the past 12 months has been dominated by geopolitical tensions. These have taken the form of trade restrictions, exemplified by the U.S.-China trade war; economic sanctions, such as those on Chinese entities including COSCO Shipping subsidiaries; and export controls, like the ones imposed by Japan on three chemical materials, which threatened to disrupt the global semiconductor manufacturing industry. Business operations have also been caught up in widespread civil unrest, triggered by simmering socioeconomic discontent, with protests and blockades in Hong Kong, Chile, Lebanon, South Africa, Bolivia, and Puerto Rico.
Many of the predictions we made in the 2018 edition of this report were fulfilled over the past year, for example:
- Continuing trade tensions led many organizations to consider restructuring their manufacturing networks, especially to explore options beyond China. The resulting economic uncertainty prompted industrial action and brought some suppliers in the manufacturing sector to the brink of insolvency.
- Governments have tightened environmental and safety regulations, and increased their enforcement activities, driven by climate change mitigation policies and safety crackdowns following industrial accidents, such as the Jiangsu explosion in China.
- Unprecedented numbers of container ship fires put maritime-dependent supply chains under pressure and demonstrated the need to screen and track cargo at sea.
- Intense weather-driven disruptions, from the spring Midwest flooding in the U.S. to Hurricane Dorian in the Caribbean and the recent wildfires in Australia, have caused widespread business interruptions.
This year’s Annual Risk Report takes a closer look at the major events of last year, and identifies the risks we foresee gaining greater prominence in 2020. They include climate change activism targeting logistics infrastructure, the growing cyber
threat faced by manufacturing operations, narcotics cartels increasingly using commercial container shipping lines, and risks from the unpredictable, like the recent novel coronavirus outbreak. The report also highlights risks that are likely to remain a significant factor in 2020.
Our team of experts at Everstream Analytics continuously monitors risk events to help you protect your business. From the hundreds of thousands of events we’ve assessed across the year, our Annual Risk Report brings you the top trends and events that are worth closer consideration, so that you can begin the new year with the knowledge you need to keep your supply chain safe.
Regardless of the size and scope of your network, the insights presented in this report will help guide your supply chain monitoring and risk mitigation strategy, enable better- informed decision-making processes, and aid the formulation of responses that create more resilient and sustainable business operations.
The Everstream Analytics Annual Risk Report 2020 provides an analytical overview of the major challenges that global supply chains faced over the past year. It also examines emerging risk trends and evaluates how our forecasts for the previous year materialized.
This year, fires and ground transportation disruptions featured prominently in our reporting. Everstream Analytics recorded an increase of over 60 percent compared to the previous year in fire- related events, while over two-fifths of all fires recorded worldwide posed either a moderate or severe risk to supply chain operations. These ranged from a major fire at the International Terminals Company (ITC) along the Houston Ship Channel that released harmful chemicals to Australian bushfires that have burned through New South Wales and Victoria States. Ground transportation disruptions also came in the form of blockages to key road and rail transportation routes that were halted, at least in part, by growing civil unrest, natural disasters, and industrial action such as the Canadian National (CN) Railway strike in late November that stopped shipments of oil, grains, and potash across the country.
International trade conflicts – most notably the U.S.-China trade war – continued to pose serious threats to supply chain and manufacturing operations as companies and suppliers were faced with uncertainty brought on by successive tariff escalations, regulatory hurdles, and other non-tariff barriers. Natural disasters similarly continued to have a major impact on global supply chains with Tropical Storms Lekima, Faxai, and Hagibis hitting key chemicals, auto, and tech manufacturers based in China and Japan, while Hurricane Dorian swept through the Bahamas and Puerto Rico,
a crucial hub for pharma manufacturers, and later halted container traffic on the U.S. East Coast.
Part 1 of the report takes a closer look at the top ten supply chain risk trends to watch for in 2020. These include trends such as cyber-attacks, trade and border disputes, and civil unrest spurred by social inequality and climate activism.
Part 2 of the report looks back at the events that shaped the supply chain risk landscape of 2019 which consist of trade disputes and restrictions particularly from the U.S.-China trade war; major chemical explosions in China, France and the U.S.; natural disasters; supply chain cyber-attacks; and civil unrest leading to logistics and manufacturing disruptions.
Part 3 of the report provides a global overview and regional summaries across five geographical regions in North America, Latin America and the Caribbean, Europe, Middle East and Africa, and Asia Pacific. The regional deep-dives provide a nuanced view of risks that are most prevalent in each region, and bring to the forefront high-impact events that affected supply chain operations in 2019.
Part 4 of the report analyzes the risk themes that became more relevant throughout the year for supply chain operations around the world. It also provides a snapshot into a number of new event categories introduced by Everstream Analytics in 2019 to meet the evolving intelligence needs of supply chain risk professionals.
10 Top Trends to Watch in 2020
The global economy relies on the smooth operation of complex and sophisticated supply chains. Yet those supply chains are also vulnerable to a range of natural and man-made disruptions, from inclement weather to crime and changes in trade and regulatory policies.
Every year, Everstream Analytics monitors thousands of events and incidents affecting supply chain and logistics operations around the world. Our work gives us a unique perspective on the shifting landscape of risks and disruptions that present ever-evolving challenges for companies. In this chapter, we highlight affect your supply chain network?
1. Manufacturing Sites on the Security Front Line
Greater connectivity and digitalization are making manufacturing and supply chain operations more vulnerable to cyber-threats. Factories and logistics facilities can be caught in the crossfire
of large-scale cyber-attacks by criminals or state-sponsored groups, but they are also being targeted directly by a variety of actors.
Ransomware attacks, which encrypt data and block access to systems until a ransom is paid, have become the most common and most costly form of supply chain cyber-attack. As well as being forced to pay to regain access to their systems, victims of such attacks face additional losses from lost production or logistics disruption. In 2019, multiple companies suffered attacks from LockerGoga, a ransomware that targets industrial control systems. Victims included a French engineering ten trends to look out for in 2020. How will they company, a Swiss vehicle manufacturer, a Luxembourg pharmaceutical company, and a number of metals and chemicals players worldwide.
Perhaps the most disturbing new trend in cyber-security, and a key threat for 2020 and beyond, is the appearance of so-called Advanced Persistent Threat (APT) attacks on manufacturing organizations. Thought to be primarily state-sponsored organizations, APT groups have the skills, resources, and patience to conduct highly sophisticated and long-lasting incursions into corporate IT systems. While financial institutions and government networks were previously the favored targets of such groups, 2019 saw evidence of their involvement in attacks on multinational automakers, chemical and pharmaceutical companies and even an airline. Heading further into 2020, the growth of APT attacks looks increasingly likely to impact multiple industries across global supply chains.
2. Trade Policy Shifts Reshape Global Cargo Flows
New and renegotiated trade agreements, along with the imposition – or threat – of tariffs, have the potential to impact the flow of goods around the world during 2020. Trade and investment decision-making are being hampered by significant uncertainty around the scope and timing of several major deals.
While the U.S. and China signed the first part of a trade agreement on January 15 covering topics such as intellectual property theft and increased Chinese purchases of U.S. goods, no official timeline has been set for the start of negotiations on a more substantial second part of the trade deal. It appears likely that no deal will be struck until after the November 2020 U.S. presidential election, especially since the coronavirus outbreak has the potential to delay the purchase of more American goods by China.
The newly negotiated replacement for the former NAFTA arrangement, between the U.S., Canada, and Mexico, is taking shape under the U.S.-Mexico-Canada (USMCA) trade agreement, which will have major implications in a number of areas, including the automotive industry, intellectual property rights, and digital trade.
Tensions remain between the European Union (EU) and U.S. over the automotive sector, despite the U.S. allowing a deadline for the imposition of new tariffs on vehicles and auto parts to expire in November 2019. European carmakers worry that the issue could re-emerge during the U.S. presidential election campaign, in particular given that trade disputes have been partially or fully settled with China, Canada, and Mexico.
The EU and MERCOSUR, the South American trade bloc, signed a deal to reduce import tariffs in June 2019, but the agreement has not yet been ratified by the EU side, due to concerns in some member states that imports could threaten their home agricultural sectors. Resolving those issues to the satisfaction of all EU member states could take years.
After achieving a significant majority in the December 2019 general election, UK Prime Minister Boris Johnson made good on a promise to withdraw the UK from the EU on January 31. Under the terms of the Brexit withdrawal agreement, the two sides have until the end of the year to negotiate a new trade agreement, a challenging time frame that leaves considerable uncertainty about the eventual scope and terms of the deal.
After more than six years of negotiations, fifteen Asia-Pacific countries hope to sign a major new trade agreement in 2020. The Regional Comprehensive Economic Partnership (RCEP), which includes major economies such as China and Japan, aims to boost commerce across the group by lowering tariffs, standardizing customs rules and procedures, and widening market access.
3. Economic Sanctions on the Rise
Governments around the world have been ramping up their use of economic sanctions in support of wider diplomatic or political objectives. With many disputes still far from resolved, the use of such measures is likely to increase in 2020, while supply chains must also react to the impact of sanctions already imposed.
Export control restrictions on sensitive technologies imposed by the U.S. as part of its ongoing trade war with China threaten to have serious implications for global technology supply chains for the foreseeable future. The U.S. has also targeted specific Chinese tech firms through Entity Lists, while China has threatened to publish its own list targeting foreign companies that “block off, disrupt supplies, and damage the legitimate interests of Chinese enterprises.”
It is becoming clear that foreign companies, mostly believed to be from China, are increasingly attempting to circumvent tariffs and import restrictions by illegally transshipping goods through third party companies to disguise their true origin. Recent cases of such practices have been reported in Vietnam, Malaysia, Cambodia, Philippines, Serbia, and Mexico.
U.S. sanctions on Iran and Venezuela have already had a major impact on energy and chemicals supply chains that have previously used oil products from these countries. The January 2020 assassination of a top Iranian general by U.S. drone has significantly increased the tension between the two countries.
An ongoing diplomatic dispute led Japan to tighten export controls on three key high-tech materials used for semiconductor and smartphone production in South Korea. A prolonged stalemate could force technology companies to come up with contingency plans to combat supply shortages and higher prices as restrictions have already resulted in a drop in memory chip production.
4. Social Equality Protestors Target Critical Transport Infrastructure
A slowing global economy is likely to encourage further social unrest in Latin America and the Middle East. Protestors, many of them young and unemployed, are taking to the streets to vent their frustration about economic and social inequality and political corruption. Many of these anti-government demonstrations now target supply chain infrastructure in an effort to maximize economic disruption. Highways that provided access to regional airports, seaports, oil fields, and borders were all blocked by protesters during 2019.
While some protests have continued for a month or more, most disruption to infrastructure has been intermittent. Protests have also sparked sympathy actions in other sectors. In Chile, for example, mining labor unions took part in a strike against the government’s subway fare hike. Visible activism in one region can also encourage activity in neighboring countries: protestors recently took to the streets in Columbia, for example, following extensive action in Chile and Bolivia. The issues underlying the discontent are long-running and difficult to resolve, however, creating significant risk of recurrence.
5. Breaks at the Borders
Land border crossings are another area where political action is having an increasingly negative impact on supply chain operations. Governments are closing border crossings, or implementing additional checks, in response to migration issues, such as between the U.S. and Mexico, military tension, such as the dispute over the Kashmir region between Pakistan and India, or for security and smuggling reasons, as employed recently in Nigeria.
Tighter restrictions on border crossings, strict security measures and controls have an impact on waiting times and can lead to increased costs for freight forwarders. Long delays at borders are particularly problematic for shipments of perishable or high value goods, or where manufacturing supply chains rely on just-in-time deliveries. Border delays can even force companies to find alternative production sites and use different transport modes to avoid land transport challenges.
As political situations around the world remain volatile and tensions continue to simmer, these scenarios are likely to occur also in 2020. In the UK, for example, the uncertainty of trade policies after Brexit remains open as regards the UK’s trade with other European countries. Furthermore, unresolved Kashmir conflicts in India and Pakistan pose a threat to supply chains in the region. Migration issues may come under additional scrutiny during the U.S. presidential campaign, especially if another large migrant caravan reaches the U.S.- Mexico border. Everstream Analytics data shows that high-impact border delays have been increasing in frequency since 2018, a trend that is likely to continue in the coming year.
6. Climate Activism Heats Up
Protests demanding stronger action on climate change reached an unprecedented scale in 2019. A new, and often very youthful, generation of activists staged international climate strikes involving traditional street protests across multiple countries.
Meanwhile, other environmentalist groups have targeted specific industries and transport hubs, including London’s Heathrow Airport and the Houston Ship Channel in the U.S. From the activists’ perspective, these targeted protests achieved their twin aims of a direct impact on sectors with significant carbon emissions and widespread media attention. It is likely that the tactic will be used again during 2020. Potential targets sectors include petrochemical, automobile, and heavy industry manufacturing sites, transport hubs and crude oil shipping routes. Climate change related protests are likely to intensify during international summits such as the next meeting of the United Nations Climate Summit from November 9-19 in 2020, in Glasgow, UK.
7. Environmental Regulations Get New Teeth
Global and regional efforts to reduce air pollution are intensifying, with significant implications for the manufacturing and transport operations that fall within their scope. In shipping, for example the International Maritime Organization (IMO) requirement for vessels to use low-sulfur fuels came into effect at the beginning of this year. Major shipping lines, including Maersk and Hapag-Lloyd have already increased their surcharges to cover the additional cost of the switch and further impact on shipping is expected in the coming months as countries start to enforce compliance with the IMO requirement.
Chinese authorities issued multiple winter season production curbs and blanket production halts in order to control emissions that lead to poor air quality. The measures are likely to affect several industries across China, such as the steel, chemical and coal industries. For the same reason, both India and China have introduced new traffic control measures. In India, an odd-even road license plate traffic rotation scheme was implemented in November to address severe smog in urban centers. In Shanghai, diesel trucks will be banned from using highways in the city from April 2020.
In Europe, the Netherlands is set to reduce its nationwide maximum vehicle speed limit from 130 kilometers per hour (kph) to 100kph in an effort to reduce nitrogen pollution. The move comes as a result of a court order requiring the Dutch government to ensure that emissions in 2020 are at least 25 percent lower than those in 1990. The government is also expected to take additional steps, such as the suspension of large construction projects, in efforts to further reduce pollution.
8. Alternative Trade Routes Create Opportunities and Threats
2019 saw significant investment in the development of new long-distance transport routes, especially in the sea and rail sectors. As a result of long-term reduction in sea ice linked to climate change, for example, the Northern Arctic route is becoming an increasingly popular option for vessels traveling from Asia to Europe. Use of the route increased by more than 60 percent in 2019 over the previous year and was expected to reach 30 million tons by year end. As more companies look to use this transport, territorial disputes may emerge as a new threat.
Rosatom, Russia’s atomic energy agency, has received a broad mandate from the government to boost the country’s position in the Arctic. The company has announced plans to expand its existing nuclear icebreaker fleet and revitalize port infrastructure. Rosatom also plans to develop its own container fleet in 2020, adding containerized freight to the oil, coal and gas vessels that are today’s largest users of the Northern Arctic route. Opening up of the new route may trigger higher traffic through the area, resulting in possible environmental degradations.
In rail, China has steadily expanded freight services to Europe, with planned investment of USD 119.38 billion (EUR 107.7 billion) in 2019, a 10 percent increase on the previous year. New rail routes opening last year included a service between Xi’an, Hamburg and Neuss via Kazakhstan, Russia, Belarus, Lithuania and Russia’s Kaliningrad; and a service from Shaanxi to Eperjeske in Hungary via Ukraine. Plans for 2020 include the development of new services between China, Ukraine, Azerbaijan and Georgia.
9. Narcotics Cartels Target Container Shipping Lines
In 2019, unprecedented quantities of narcotics were seized from container ships. Germany, the United Kingdom, the Netherlands, Spain, and Greece experienced the largest seizures of narcotics ever recorded at their ports. In June, the seizure of 20 tons of cocaine by the United States Customs and Border Protection agency on the container ship MSC Gayane was the largest ever by the United States.
The influx of illicit drugs being smuggled via container ships is concerning many shipping companies as governments around the world are imposing harsher measures on companies that are found to contain narcotics on their vessels. The MSC Gayane was confiscated by authorities and the container ship operator was forced to pay USD 50 million (EUR 45 million) in cash and bond to release the vessel after it was held for nearly a month.
In an unusual move, the U.S. Attorney for the Eastern District of Pennsylvania plans to seek permanent forfeiture of the ship. The seizure affected the company’s reputation and U.S. authorities have temporarily removed the carrier from a list of trusted operators that can move goods through security checks more quickly. Bribery of crew poses significant risk to maritime shipping, as they can play a role in transporting illicit cargo.
In 2019, the increase in seizures and volume of trafficked narcotics was more of a complication rather than a disruption to supply chains. This trend seems to be intensifying, however. Seizures of cocaine aboard commercial ships and private vessels world-wide more than tripled over the past three years, to 73.2 metric tons in 2019 from 22.4 metric tons in 2017, according to Everstream Analytics data. In response to police pressure at ports, drug trafficking routes and operations have become more complex. As port authorities attempt to address the issue, delays in cargo handling due to increasingly diligent security checks should be expected in 2020.
10. Black swan Events Loon in the Shadows
While many supply chain risks and trends can be anticipated, certain ‘black swan’ events can be elusive to predict by nature. Extreme-impact, very low-probability catastrophic scenarios can not only create devastating crises but also pose serious disruptions to supply chain operations that can take months to recover from.
The most notable example is the COVID-19 novel coronavirus outbreak in early 2020 that has severely disrupted global supply chains through impeding air, ocean, and ground transportation routes, and triggered supply and labor shortages for key components due to government-mandated lockdowns and quarantines. While the outbreak of the novel coronavirus may have been impossible to predict, its unprecedented spread and the draconian measures required to contain it has demonstrated that once-in-a-decade disruptions are worth preparing for.
In this sense, black swan events can be the ultimate test of supply chain resiliency. Although no supply chain is completely immune from the impact of such crises, businesses will need to be proactive in managing the unpredictable, especially in a highly connected world with integrated supply chains.
A Look Back on the Year: The Supply Chain Risk Landscape of 2019
Our predicted trends of 2020 have been shaped by the events that transpired last year. This section of the report takes a closer look at how the supply chain risk landscape evolved during 2019.
Over the past year, Everstream Analytics analysts identified thousands of major events that resulted in significant supply chain disruptions. These included industrial fires and explosions, industrial action, civil unrest and protests, port disruptions, cargo and border delays, trade disputes, production halts, and natural disasters.
Industrial Fires and Explosions
China: Jiangsu explosion triggers safety crackdown
In March, a major explosion at a petrochemical plant belonging to the Jiangsu Tianjiayi Chemical Company killed 78 people and injured more than 600. In the aftermath of the blast, China launched a nationwide wave of industrial safety inspection campaigns that have triggered significant production halts, plant closures, and industrial zone shutdowns across the country. Chinese authorities for safety and environmental protection for the chemical industry in Jiangsu announced plans to shut down 579 chemical manufacturing companies and close nine chemical industrial parks by the end of 2019.
U.S.: Chemicals storage facility fire disrupts Houston shipping
Also in March, a severe fire and chemical spill at Intercontinental Terminals Company (ITC) hit waterway traffic on the Houston Ship Channel. The channel remained partially closed for 32 days, temporarily stranding dozens of vessels further inland in the Turning Basin. Vessels that waited for the channel to reopen faced severe disruptions to their delivery schedules, while shipments on vessels ordered to skip the port were either canceled or forced to complete their delivery via ground from the next port of call.
Facilities along the Houston Ship Channel continue to face heightened transportation disruption risks. The area is a bottleneck for transportation routes that depend on waterway access, exposed to significant weather risks, and contains a high concentration of volatile, combustible, and otherwise hazardous materials in closeproximity to the shipping route.
North America: General Motors strike puts suppliers under stress
In the largest factory strike in the U.S. since 2007, nearly 50,000 unionized workers at General Motors downed tools in September. The walkout, which lasted more than a month, was driven by demands for higher pay and better healthcare benefits, as well as concerns over job security in light of increased automation and the industry’s transition to electric vehicles. The strike cost GM more than USD 1 billion (EUR 902 million) in lost profits as production lines at more than 30 factories were halted in the U.S., Canada, and Mexico. Lower demand from GM forced parts suppliers to cut production too, resulting in wage cuts or temporary layoffs for about 75,000 staff.
|The strike cost GM more than USD 1 billion (EUR 902 million) in lost profits as production lines at more than 30 factories were halted in the U.S., Canada, and Mexico.|
Canada: Rail strike signals supply chain stoppages
From November 19 to 27, workers at the Canadian National Railway (CN Rail) went
on strike, severely disrupting rail-dependent supply chains such as lumber, minerals, agricultural products, chemicals, and oil. The dispute, over safety and overtime concerns, affected 60 percent of Canadian rail capacity. The strike led some rail- dependent facilities to halt production and forced others to secure alternative transportation. Ports and intermodal facilities faced backlogs, and a looming propane shortage threatened agricultural grain drying operations in Quebec. With the Canadian Parliament in recess, panic mounted but was quickly relieved when an agreement was reached to resume activity on November 27.
Finland: Post on hold
For two weeks in November, postal services in Finland stopped completely during strike action by members of the Post and Logistics Union (PAU). Several other trade unions staged temporary solidarity strikes that disrupted cargo movement via air, road, and sea within Finland as well as to and from the country.
Mexico: Teachers stop trains
A 31-day railroad blockade by a teacher’s union in Michoacán caused significant disruptions to supply chain operations throughout Mexico. On January 14, teachers in the Mexican state of Michoacán launched a strike to demand payment of overdue salaries and bonuses from as far back as 2015. During the 31-day demonstration, protestors targeted rail lanes throughout the state, bringing traffic to a complete stop on two important routes used by manufacturers in central Mexico. The action stopped more than 250 trains and an estimated 2.1 million tonnes of cargo. More than 10,000 containers were left stranded at the ports of Manzanillo in Colima state and Lazaro Cardenas in Michoacán. Economic losses from the blockade amounted to 14 billion Mexican pesos (USD 736 million; EUR 662 million), according to the Mexican Confederation of Industrial Chambers.
|The action stopped more than 250 trains and an estimated 2.1 million tonnes of cargo. More than 10,000 containers were left stranded at the ports of Manzanillo in Colima state and Lazaro Cardenas in Michoacán.|
Civil Unrest and Protests
Hong Kong: Pro-democracy protestors take to the streets
Throughout the second half of 2019, Hong Kong’s protest crisis brought about an unprecedented level of civil unrest and unpredictability for companies operating in the world’s busiest cargo hub. Hong Kong International Airport (HKG) was the target of several major sit-in demonstrations, with one forcing a two-day shutdown and the cancellation of more than 300 flights. Roadway closures were also common with protestors attempting to paralyze main transport routes to and from the airport, which had a serious impact on the ability of cargo carriers to get freight to and from the airport. As the confrontations between Hong Kong police and protestors became increasingly violent, water cannon, rubber bullets, tear gas, petrol bombs, barricades, and fires brought traffic on major roadways to a standstill.
|Hong Kong International Airport (HKG) was the target of several major sit-in demonstrations, with one forcing a two-day shutdown and the cancellation of more than 300 flights.|
Chile: Underground protests spread out
A rise in subway fares was the catalyst for a nationwide wave of protests against the government of Chile in October, with demonstrators demanding action to address the rising cost of living and the inequality prevalent in the country. Two nationwide port strikes paralyzed domestic and international ocean freight, and the Copper Workers Federation (FTC) joined the strike, forcing the Andina copper mine to shut down. Many major roads were also impeded.
As the demonstrations intensified, the government declared a state of emergency. President Pinera pledged a state subsidy to increase the minimum wage and agreed to draft a new constitution in 2020. Despite the president’s concessions, protests continued to erupt spontaneously throughout the country.
Bolivia: People v. president
Anti-government sentiments spread to Bolivia in October, after the controversial election victory of President Evo Morales. Violence broke out in several cities across the country, including the capital La Paz. Protestors burned tires and blocked roads, disrupting road and air freight. Flight operations and access to airports, particularly at El Alto International Airport in La Paz were severely impacted. The protests resulted in shipping difficulties and production halts in Cochabamba, the agricultural and industrial hub of Bolivia, which has significant assets in the country’s chemical, automotive, technology, and raw materials industries. By November 6, the Government of Bolivia estimated that total losses from impeded commerce and looting had reached USD 167 million (EUR 150.83 million).
|By November 6, the Government of Bolivia estimated that total losses from impeded commerce and loot- ing had reached USD 167 million (EUR 150.83 million).|
Since the end of November 2019, ground and air transportation conditions have gradually returned to normal, but the political situation in Bolivia remains unstable, with an interim government and minor localized demonstrations taking place daily.
South Africa: Cargo trucks targeted
South Africa faced several waves of unrest during 2019. During the summer, there was a spike in violent attacks on trucks along the country’s major transport routes. Hundreds of trucks were torched, looted, and their drivers attacked. Operators were advised to avoid the main N3 completely, and to restrict transport activities to daytime hours, increasing traffic congestion and delaying deliveries. While the attacks were indiscriminate, the automotive industry was particularly vulnerable due to its reliance on road links to and from the Port of Durban.
Port Disruptions and Hazardous Transport
Panama Canal: Short of water
Between January and June, drought conditions linked to an El Niño weather event reduced water levels in the Panama Canal to their lowest recorded level. Thisprompted the canal authorities to issue several draft restrictions to cargo vessels. The first restriction came into effect on February 11, limiting vessels to a maximum draft of 49 feet (14.94 meters). In response, vessel operators had to reduce capacity, pushing up freight costs. In April, draft limits were reduced to 44 feet (13.41 meters), and a further restriction was only avoided by the arrival of rainfall in June.
South Africa: Transnet port slowdown
A go-slow by workers at state-owned port operator Transnet Port Terminals caused severe shipping disruptions across South Africa in June and July 2019. The action led to berth waiting times of 4 to 5 days for vessels at the Port of Durban, where 60 percent of South African imports and exports are processed. At Ngqura Container Terminal near Port Elizabeth, total waiting times for berths reached more than 7 days and container loading slowed from 25 containers per hour to between 5 and 8 containers per hour. The slowdown had a significant impact on local agricultural cargo, specifically citrus exporters who are in high season between February and August. Carmaker Volkswagen also experienced production delays as critical deliveries of parts were held up.
Bahamas: Containers on fire
In the first days of 2019, fire broke out on container ship Yantian Express, operated
by shipping line Hapag-Lloyd. The cause of the fire was attributed to wrongly declared dangerous cargo in a container, something which is believed to have been the root cause of a number of large fires on container ships in recent years.
Efforts to bring the blaze under control took several months, beginning at sea and continuing in the port of Freeport, Bahamas. Of the 7,500 containers aboard, around 200 were a total loss and an additional 460 were damaged. It took almost five months for unaffected containers from the vessel to reach their original port of destination of Halifax, Canada.
|Of the 7,500 contai- ners aboard, around 200 were a total loss and an additional 460 were damaged. It took almost five months for unaffected containers from the vessel to reach their original port of destination of Halifax, Canada.|
Vietnam: Capsized container ship blocks Long Tau River
Since mid-October, Tau River has been closed to marine traffic after the capsizing of VietSun Integrity, a Vietnamese domestic vessel loaded with 285 containers. The river is the main marine route to the Cat Lai Container Terminal in Ho Chi Minh City. To reach the port, vessels must currently use Soai Rap channel, a longer and shallower route, restricting cargo capacity and pushing up fuel costs.
Vessels with a draft greater than 9m were being directed to dock at Cai Mep International Container Terminal, with cargoes taken on to Ho Chi Minh via land.
To stay within the draft limit, some international carriers reduced their vessel capacity, impacting operations and port schedules across the region. The timeline
for reopening the channel had been repeatedly extended as attempts to remove containers from the capsized vessel ran into problems. In December, three divers
died after being trapped under a collapsed container.
Cargo and Border Disruptions
U.S.-Mexico: Migrant caravans
In 2019, as in 2018, migrant caravans at the U.S.-Mexico border, and reactions from authorities, had significant impact on logistics arteries. Migrant caravans departing from locations as far south as San Pedro Sulas in Honduras and as far north as Chiapas, Mexico, headed for the U.S.-Mexico border in January, February, March, April, and June. Large groups of migrants arriving at U.S. ports of entry such as San Ysidro, CA; Douglas, AZ; El Paso, Laredo, and Brownsville, TX increased cargo lane waiting times from several minutes to nearly 12 hours. In response to U.S. pressure, Mexican authorities stepped up efforts to manage the flow of migrants at the Mexico-Guatemala border. Pedestrian traffic and high volumes of hitchhikers also caused disruption along major truck routes inside Mexico.
France-Spain: Border protests
Protests broke out across the Catalonia region of Spain following the jailing of nine regional leaders in October, disrupting road traffic across the region for weeks. On November 11, protesters began blocking the AP-7 highway, which connects the coast of eastern Spain with France, near the border crossing La Jonquera, halting cross- border traffic. Within 24 hours the blockage led to queues on a stretch of around 10-15 kilometers and nearby highway A9 had to be closed for security reasons. French police eventually dispersed the protestors after more than 30 hours. Around 20,000 trucks move across the La Jonquera border crossing every day and cargo carriers estimated daily losses of EUR 15 million (USD 16.55 million).
|Around 20,000 trucks move across the La Jonquera border crossing every day and cargo carriers estimated daily losses of EUR 15 million (USD 16.55 million).|
Pakistan-India: Airspace closure
Pakistan closed its airspace for all civilian traffic after India carried out air raids on Pakistani territory on February 27. India also briefly suspended air traffic at eight airports at the time, mostly near its western border. The closure forced airlines to divert, delay, or cancel a large number of the 800 flights a day which usually cross the region. Authorities in Afghanistan also closed its airspace to over-flights, causing additional disruptions. Pakistan eased some air restrictions in April, but continued to bar traffic flying from India until July.
Nigeria: Border shutdown
Nigeria closed all of its land borders from October 2019 in an effort to boost the local economy and curb smuggling. The move follows similar tactics elsewhere in Africa: Kenya, Rwanda, Sudan, and Ethiopia had also closed (and later reopened) parts of their borders. The measure threatens the smooth flow of trade via Nigeria which includes transnational corridors, such as the Lagos-Mombasa Highway that links Nigeria with Cameroon, the Central African Republic (CAF), the Democratic Republic of the Congo (DRC), Uganda, and Kenya; and the Trans-Sahara Highway, which connects it to Algeria via Niger. Perishable goods, but also textile, chemical, automotive and other industries have been hardest hit, with many local traders in neighboring countries discontinuing their operations. Goods now have to be imported via Nigerian ports, causing increasing congestion there. Delays exceeded 20 days at Apapa, the largest seaport, in December and the chaos prompted forwarders and port workers to threaten strike action.
Japan-South Korea: Export restrictions
Since July 2019, the rapid escalation of an ongoing trade dispute between South Korea and Japan has resulted in additional export controls and customs restrictions that threaten technology supply chains and the global semiconductor manufacturing industry. Japan announced that export control regulations would be placed on three chemical materials – hydrogen fluoride, photoresists, and fluorinated polyimide – that are important for semiconductor production. In addition, Japanese exporters will now be required to apply for a permit for each batch of export shipments to South Korea, with an inspection process that is expected to take around 90 days.
The new restrictions have disrupted integrated supply chain networks between Japanese high-tech chemical suppliers and South Korean semiconductor manufacturers. Japan produces 90 percent of the world’s fluorinated polyimide photoresists and about 70 percent of its etching gas. South Korean chipmakers reliant on those products dominate the global market for RAM and flash memory. Japan also removed South Korea from a preferential whitelist, a move that will result in additional customs clearance measures for 40 categories of products that could have sensitive military applications. South Korea retaliated by removing Japan from its own trade whitelist in September.
|The new restrictions have disrupted inte- grated supply chain networks between Japanese high-tech chemical suppliers and South Korean semiconductor manufacturers. Japan produces 90 percent of the world’s fluorinated polyimide photore- sists and about 70 percent of its etching gas.|
U.S.-China: COSCO Shipping sanctions
In September, the U.S. Treasury imposed sanctions on six Chinese entities – including two COSCO Shipping subsidiaries – for allegedly transferring oil from Iran in violation of U.S. sanctions. The sanctions directly affected more than 40 tankers and sent global crude oil freight rates surging. China’s largest refiner Sinopec announced that it would be reducing operations from November, citing the high cost of crude and eroded margins. The sanctions were eventually lifted in early 2020.
U.S.: Tariff escalations
The U.S. ramped up the protectionist trade stance that began in 2018, with the escalation and imposition of tariffs and non-tariff barriers against a number of overseas economies. Most of the affected countries and trading blocs have retaliated with their own measures, amid a continued backlash against global economic integration.
The U.S.-China trade war saw both sides engage in escalating rounds of tariffs and other types of retaliatory measures following a breakdown in negotiations in
May 2019. The U.S. has applied tariffs on USD 362 billion (EUR 328.6 billion) worth of Chinese goods while China has issued around roughly USD 110 billion (EUR 99.8 billion) in retaliatory tariffs on U.S. imports. The trade dispute has fueled speculation about a permanent decoupling of the world’s two largest economies, which could drive the localization of manufacturing in both countries, in an effort to reduce reliance on foreign suppliers.
|The U.S. has applied tariffs on USD 362 billion (EUR 328.6 billion) worth of Chinese goods while China has issued around roughly USD 110 billion (EUR 99.8 billion) in retaliatory tariffs on U.S. imports.|
The U.S. has also locked horns with the EU in its long-standing dispute over aircraft subsidies. On October 18, the U.S. imposed additional tariffs of 25 percent on more than 150 goods imported from 28-member countries of the EU and an additional 10 percent tariff on new aircraft from France, Germany, Spain, and the U.K.
In May, U.S. President Donald Trump threatened to impose 5 percent tariffs on all imported goods from Mexico, promising to escalate the tariffs if Mexico did notaddress the movement of illegal migrants traveling through the country. Washington eventually retracted its tariff threat after Mexico agreed to “strong measures” to stop illegal migrants from South and Central America crossing the U.S. border.
Norsk Hydro: Under cyber-attack
On March 19, aluminum producer Norsk Hydro discovered LockerGoga, a ransomware previously seen in France’s Altran Technologies. The ransomware halted operations at the company’s corporate headquarters in Norway and impeded productivity in its extruded solutions division throughout Europe and North America. Analysts believe the attack marks a worrying trend, due to its international scope and direct impact on production and logistics assets.
Brazil: Brumadinho dam breach
On January 25, a dam operated by the Vale S.A. mining company in Brumadinho, Minas Gerais burst leaving 224 dead and 69 missing. The company, already under scrutiny for its environmental record, was accused of ignoring warning signs of problems with the dam. The disaster had significant impact on the iron-ore supply chain, as a result of operational stoppages and demonstrations that blocked the company’s rail line from its mines to southeastern ports. Recovery of the site is anticipated to last through 2021.
Mexico: Maquiladora workers strike
In early January 2019, more than 25,000 workers at more than 45 “maquiladora” factories in Matamoros close to the U.S. border went on a month-long strike over low wages. The assembly plants, which operate under a duty and tariff-free arrangement, are closely linked to the American manufacturing economy, in particular the automotive and electronics sectors. By mid-January, the action was reportedly affecting production at car plants in Michigan. Economists estimated that the strike was costing the auto industry USD 50 million (EUR 45.1 million) per day. As a result of the labor uncertainty, some companies have expressed their intentions to shut down operations in the city.
Saudi Arabia: Drone attacks on oil facilities
On September 14, a coordinated drone attack caused serious damage to Saudi Aramco’s Abqaiq oil processing facility and the Khurais oilfield. The attack forced the closure of the oil processing facilities, leading to Saudi Arabian oil output to drop by almost 5.7 million barrels per day, around 5 percent of the world’s daily oil production.
|The attack forced the closure of the oil processing facilities, leading to Saudi Arabian oil output to drop by almost 5.7 million barrels per day, around 5 percent of the world’s daily oil production.|
Bahamas: Hurricane Dorian
Hurricane Dorian was the strongest hurricane to have ever hit the Bahamas and was one of the strongest Atlantic hurricanes on record. The storm made landfall in the Bahamas as a Category 5 hurricane on September 1 causing island-wide power outages, severe road flooding, and significant damage to 13,000 buildings. Freeport, a major transshipment hub in North and Central America, closed to all vessel and truck traffic, forcing container lines to find alternative ports to transship cargo.
U.S.: Midwest flooding
In March, a series of record-breaking weather events led to extreme flooding in eastern Nebraska, western Iowa, northeast Kansas, and northwest Missouri, causing widespread transportation and production disruptions. Unusually low temperatures and record-breaking snowfall in February left waterways in the Great Plains and Midwestern United States vulnerable to a major flooding event. With ice and snow still frozen on the ground, a severe winter storm arrived on March 13, triggering widespread flooding up to 5m in depth.
Flooding on farmland and cattle-grazing land caused severe damage to assets in storage, assets in cultivation, and soil for future crops, causing financial stress for local producers. Railroad rerouting delays of 3-4 days persisted for several weeks on some lanes as sections of track remained submerged. Rail-dependent and single-road- dependent local producers in industries such as ethanol, medical devices, and agricultural equipment were most severely affected. Total damages for roads, levees, other infrastructure, agricultural crops, and livestock were estimated at USD 2.9 billion (EUR 1.9 billion) in Nebraska and Iowa alone.
|Total damages for roads, levees, other infrastructure, agricultural crops, and livestock were estimated at USD 2.9 billion (EUR 1.9 billion) in Nebraska and Iowa alone.|
California and Australia: Wildfires out of control
As in 2018, 2019 saw considerable wildfire activity throughout California, and the 2019-2020 Australian wildfire season arrived early and proved to be unusually severe. The most significant wildfire in California in 2019 was the Sonoma County-based Kincade fire, and in Australia, New South Wales was the state with the most amount of land burnt at 2+ million hectares of land as of December. In both places, the fires have caused serious supply chain disruptions and resulted in closed roads, power outages, and local evacuations.
|The impact of the storm forced around 15 companies from different industrial sectors including passenger vehicles, steel, electronics and energy, to halt production for periods ranging from a few days to two weeks.|
Japan: Typhoon Hagibis
Back to back typhoons hit the greater Tokyo region in September and October. The area is both Japan’s most populous and a significant industrial center. The Category 5 Super Typhoon Hagibis in particular, caused widespread and long-lasting impact on various industries. The storm was classified as “violent”, the highest category in the typhoon scale, and wind speeds of 257 km/h were recorded. Six major seaports along Honshu’s east coast were closed on a precautionary basis ahead of the typhoon’s landfall on October 12. Bunker delivery operations at Tokyo Bay and Nagoya also stopped from October 11-15.
Japan Airlines and All Nippon Airways canceled over 800 domestic flights and 72 international flights via Tokyo’s Narita and Haneda airports. Flight cancellations and delays meant that air freight was impacted as Narita, Kansai, and Haneda Airports are Japan’s top air cargo hub. The impact of the storm forced around 15 companies from different industrial sectors including passenger vehicles, steel, electronics and energy, to halt production for periods ranging from a few days to two weeks.
Overview and Regional Summaries
Supply chain risks have become increasingly prevalent as international trade and the globalflow of goods continue to face considerable disruptions.
This section provides an overview and regional summaries of major incidents in 2019 across five geographical regions in North America, Latin America and the Caribbean, Europe, Middle East and Africa, and Asia Pacific. It also includes a breakdown of incidents by month, country, risk cluster type and a deep dive on recorded high-impact events that affected supply chain operations in each region.
In 2019, supply chain disruptions were highest in October (8.79 percent) and July (8.78 percent), making up over 17 percent of total annual incidents reported by Everstream Analytics throughout the year. The increased number of incidents in October coincided with Typhoon Hagibis as well as the height of ongoing civil unrest and protests that rocked Chile, Bolivia, Hong Kong, Iraq, and Leb- anon. Likewise, July saw an uptick in reported alerts following a major breakdown in trading relations between South Korea and Japan that resulted in export control restrictions on key materials needed for semiconductors and global hightech supply chains.
Over one-fifth of total incidents (21.4 percent) recorded by Everstream Analytics in 2019 focused on fires, which included sub-categories such as explosions, industrial fires, and non-in- dustrial fires. Industrial fires were most frequently reported in Europe (42.2 percent), Asia (24.0 percent), and North America (23.3 percent), with the U.S. (17.7 percent), Germany (10.4 percent), and India (6.5 percent) having the highest reported figures. Notable examples include major industrial fires and explosions at the Chenjiagang Chemical Industrial Park in Jiangsu, China and at a Lubrizol chemical plant in Rouen, France – both of which had significant impact on petrochemical supply chains throughout Asia and Europe respectively.
Other noteworthy clusters with a large volume of incidents included ground transportation (17.7 percent) and civil unrest (12.4 percent). Among the sub-categories for ground transpor- tation incidents, roadway closures and disruptions (60.4 percent) were reported most frequently followed by train accidents and derailments (10.3 percent) and train delays and disruptions (9.5 percent). These outcomes can be explained by a series of events such as protests in Michoacán, Mexico that disrupted important rail transport routes in April, violent attacks targeting cargo trucks in South Africa throughout the summer of 2019, and nationwide strikes over proposed French pension reforms in late December.
Incidents covering the risk cluster civil unrest, which includes categories such as protests and riots, can be accounted for by the extensive number of social uprising that were seen across the world, most notably in Latin America. Cyber security inci- dents have also continued to pose a serious threat to supply chain operations as Everstream Analytics recorded a total of 290 cyber security incidents impacting supply chain entities specifically, with September experiencing the highest number of monthly reported alerts.
|Cyber security incidents have also continued to pose a serious threat to supply chain operations as Everstream Analytics recorded a total of 290 cyber security incidents impacting supply chain entities.|
Everstream Analytics reported a large number of high impact incidents, ones that tend to have a significant operational impact for supply chains, with industrial fires (27 percent), earthquakes (23 percent), and cargo & warehouse theft (18 percent) featuring most prominently in 2019.
Earthquakes, which can disrupt production operations, transport routes, and supplier capacity, were most frequently reported in Asia (37 percent), followed by Latin America (33.9 percent), and North America (22 percent), with Mexico (33.9 percent), Chile (9.6 percent), U.S. (9.3 percent), and Indonesia (8.9 percent) having the highest number of incidents reported by country. Some notable earthquakes include a 6.1-magnitude earthquake in Luzon, Philippines in April that badly damaged major roadways and bridges and caused the Clark International Airport to close, as well as a 7.0-magnitude earthquake in late November north of Anchorage, Alaska that caused Alaska Railroad to indefinitely shut down services between Anchorage and Fairbanks.
|Some notable earthquakes include a 6.1-magnitude earthquake in Luzon, Philippines in April that badly damaged major roadways and bridges and caused the Clark International Airport to close.|
Cargo & warehouse thefts continued to be a trend in 2019 particularly in Latin America and Europe with Brazil (31.6 percent), Germany (20.1 percent), and Mexico
(13.2 percent) having the highest reported figures. As was the case in 2018, 2019 continued to witness an increase in the theft of electronics, food and consumer products, pharmaceuticals, and auto parts being stolen due in part to poor economic conditions and political instability.
Other high impact events impacting supply chains included train accidents and derailments (9 percent), flooding (6 percent), and production halts (4 percent). Supplier insolvencies (3 percent) also featured particularly in Europe with Germany and France alone making up 63.5 percent of all total incidents reported by Everstream Analytics in 2019. The year saw a number of high-profile insolvencies in the supply chain space such as U.K. steel manu- facturer British Steel, which cited declining global prices on steel and Brexit as reasons for financial stress; international airline carriers South African Airways, Adria Airways, and Germania; and U.S. miner Murray Energy after pointing to challenging river conditions on the Mississippi River that led to increased costs.
The chart further illustrates the differences in high impact incidents across various regions worldwide. For Latin America, earthquakes and cargo and warehouse theft featured as the top two high impact incident categories for the region. Industrial fires, likewise, were more prevalent in Europe, Asia Pacific and North America, with each region making up 42.2, 24.0 and 23.3 percent respectively. These figures are reflective of the different challenges facing supply chain operations across the regions.
Regional Summary North America
In North America, July and October were the months that experienced the highest number of incidents. This is partially attributable to a spike in fire-related incidents in July. In October, large-scale industrial action by the United Auto Workers Union and resulting production halts for suppliers contributed to the reported figures. Overall incidents across North America were lowest in April, partially as a result of better weather conditions as winter subsided, resulting in minimal disruptions to ground transportation and aviation, power outages, and water supply.
The interconnected nature of North American economies, consisting of the U.S., Canada, and Mexico, presents considerable opportunities not only for cross-border trade, but also exposure to disruptions. A strike at a maquiladora, or assembly plant, in northern Mexico can adversely impact goods assembly for the U.S. market. Similarly, rail-based cargo transportation can be vulnerable to disruptions to freight train operations. The USMCA agreement of 2018-19, succeeding NAFTA, is expected to amplify these interconnected networks of trade once ratified by all 3 parties. While the proportion of events reported for the U.S. greatly exceeds that of Mexico and Canada combined, it is representative of the United States’ role as a global economic powerhouse and thus, its exposure to the interrupted flow of goods.
The largest cluster of incidents in North America was fire, which includes explosions, industrial fires, and non-industrial fires. Given its population size and economic activity, the United States led the region in all three risk categories. Fire activity in the United States this year was partially attributable to a series of explosions and industrial fires in the petrochemical industry- producing areas of Southeastern Texas, such as a fire and chemical spill at the ITC bulk liquid storage terminal in Deer Park in March; a fire and an explosion at the ExxonMobil Baytown refinery and chemical complex in March and July; an explosion at the KMCO chemical plant in Crosby in April; and an explosion at the TPC Group chemical plant in Port Neches in November.
May had the highest number of incidents in 2019 for labor- related activities and protests in the region. In Mexico, a swell of protests and strikes demanding higher wages paralyzed maquiladora plants, primarily in Matamoros. In the U.S., the United Auto Workers union launched a historic strike, triggering a wave of production halts and putting severe financial pressure on automotive suppliers across the continent. In Canada, the International Longshore and Warehouse Union representing dockworkers threatened to halt operations at key maritime terminals across British Columbia.
In some cases, civil unrest also led to ground transportation disruptions. In the Mexican state of Michoacán, teachers protesting against unpaid wages in January disrupted key rail corridors and generated container backlogs at the ports of Manzanillo and Lazaro Cardenas, affecting automotive supply chains. Additionally, due to a variety of grievances, protesting farmers and truck drivers blocked key highways across Mexico in July, August, and October. In November, a labor dispute between the Teamsters Canada Rail Conference and the Canadian National Railway triggered a strike action that resulted in major cargo transportation disruptions.
Weather was also a contributing factor to ground transportation disruptions across North America in 2019. In March, a series of weather events triggered extreme flooding in eastern Nebraska, western Iowa, northeast Kansas, and northwest Missouri, and caused extensive transportation disruptions for rail-dependent and single-road-dependent local producers in industries such as ethanol, medical devices, and agricultural equipment.
Other key risks clusters included security, aviation, infrastructure, weather and natural disaster. A critical natural disaster even in October and November that threatened local population and resulted in infrastructural disruptions was the Kincade wildfire in Sonoma County, California, which forced hundreds of thousands to evacuate and resulted in a series of precautionary rolling power blackouts affecting approximately 940,000 commercial and residential customers near wildfire hotspots in Northern California. In August and September, the threat of Hurricane Dorian resulted in approximately 1,400 flight cancellations in addition to a wave of temporary production halts, port closures, and ground transportation disruptions from Florida to North Carolina.
At 24 percent, industrial fire was the predominant high impact event in the region, with a series of events impacting industrial facilities and causing production halts. Many high-profile ones affected petrochemical facilities, but other lesser-known events occurred at metal fabrication facilities and material recycling plants. Given the frequency of freight rail traffic across the region, train accidents and derailments at 20 percent were also noteworthy high impact events. A significant event in this category includes the CN Rail derailment between Port Huron, Michigan, U.S. and Sarnia, Ontario, Canada that considerably disrupted freight traffic between the two countries.
Cargo theft events at 12 percent proved to be a relatively persistent, though a decreasing, supply chain threat when compared to the 12.3 percent reported figures for 2018. For Mexico, in particular, 2019 saw the creation of the National Guard, which was frequently employed in counter cargo theft operations across the country, most notably against attempted freight rail cargo thefts. The geography of the Great Plains, Oklahoma; Texas-based Tornado Alley; as well as Canada’s tornado corridor from southern Quebec and Ontario through the Prairies has made tornadoes, at 8 percent, a notable occurrence in the region.
The high impact risk categories consisted of production halts (3 percent) and industrial action (2 percent), which were relatively minimal in number but significant in impact, as demonstrated by the prolonged strike initiated by the United Auto Workers union. Trade restrictions events (consisting of 39 percent of the ‘Other’ risk category), attributable to the extended trade war between the United States and other countries, was a notable supply chain disruption across 2019.
Notable Incidents From the Year
January: Hexion declares force majeure on its bisphenol A (BPA) production in Deer Park, Texas. On January 29, chemi- cal producer Hexion declared force majeure on its bisphenol A (BPA) production in Deer Park, Texas, disrupting U.S. upstream supply of the material — commonly used in the production of polycarbonate plastic and epoxy paints, resins and coatings — through at least the first half of 2019.
February: Fire leads to evacuation of components maquila- dora in Piedras Negras. On February 22, 150 employees of the Lincoln Industries maquiladora were evacuated from the company’s facilities in the Piedras Negras Industrial Park due to a ventilation system fire. The plant specialized in metal finishing for motorcycle parts. The fire imperiled 20 assembly plants with over 5,000 employees.
March: Fire and chemical spill at bulk liquid storage depot disrupts waterway traffic on the Houston Ship Channel.
On March 22, a chemical spill that followed a 65-hour fire at Intercontinental Terminals Company in Deer Park, Texas stranded dozens of vessels and completely halted waterway traffic from the Tucker Bayou eastwards to Light 116 near the BOSTCO barge dock for 3 days. Fully unrestricted traffic was not reinstated until 32 days after the initial closure, on April 23.
April: Central American migrant caravans exacerbate U.S.-Mexico border crossing delays. On April 4, the effects
of the Central American migrant caravans continued to have negative effects on U.S.-Mexico border ground transportation, as trucks faced long wait times at several border crossings between Mexico and the United States including those in Ciudad Juárez, Chihuahua, and Nuevo Laredo, Tamaulipas, where delays of up to 12 and 11 hours respectively were frequently reported.
May: Explosion destroys AB Specialty Silicones facility in Waukegan, Illinois. On May 3, an explosion occurred when employees erroneously added a chemical to a mixture in the plant, killing 4 and causing at least USD 1 million (EUR 890,000) in damages to the plant and surrounding businesses. Although the plant structure collapsed and was completely destroyed, the company was able to resume production approximately 10 days later.
June: Cargo thieves rob apparel cargo from Benito Juarez International Airport. On June 26, a theft of USD 1.2 million (EUR 1.06 million) worth of Adidas products from the customs area of the International Airport of Mexico City (AICM) was reported. According to information released by local authori- ties, the armed individuals entered the airport and hijacked a loaded tractor trailer in the early hours of June 25.
July: Farmers block key highways across Mexico. On July 17, farmers affiliated with the organization Cadenas Productivas blocked traffic for cargo vehicles on multiple highways and caused extensive roadway disruptions. They were protesting a reduction in financial support from the government.
August: Ports throughout Florida experience operational disruptions due to Hurricane Dorian. The impending arrival of Hurricane Dorian caused widespread port shutdowns throughout the State of Florida. Ports reopened around September 2, after the majority of the storm devastated the neighboring Bahamas.
September: Malware attack disrupts automotive parts production at Rheinmetall sites in Brazil, Mexico, and the United States. On September 26, automotive parts producer Rheinmetall disclosed that it had been hit by a malware attack that forced an IT systems shutdown and significantly disrupted production at sites in Novo Odessa, Brazil; Celaya, Mexico; Pontiac, Michigan, and Marinette, Wisconsin in the United States. The company expected the slowdown to persist for 2-4 weeks with a financial impact of EUR 3-4 million (USD 3.27-4.36 million) per week.
October: Effects of ongoing GM strike cause auto-part maquiladoras to halt production. The UAW GM strike, underway since September, started to take its toll on cross- border manufacturing in the NAFTA area. Coahuila maquilado- ras specializing in auto parts were forced to halt production on October 1, remaining so for 6 more days. GM plants themselves in Mexico would not restart until October 25.
November: Striking workers at CN Rail take 60 percent of Canadian rail capacity offline in contract dispute. From November 19 to 27, members of the Teamsters Canada Rail Conference who work for the Canadian National Railway went on strike due to alleged safety concerns and contractual issues. The measure caused severe disruptions in rail- dependent industries such as lumber, minerals, agricultural products, chemicals, and oil, and complicated just-in-time deliveries to automotive assembly plants through the Detroit-Toronto corridor.
December: Celadon Group files for bankruptcy. On December 9 Celadon Group Inc. filed for Chapter 11 bankruptcy. Operations began to wind down as early as December 6, as some drivers received instructions to drop loads and transfer them to other carriers. The insolvency was attributed to a failed bet on atruck-leasing division and an associated accounting scandal that lead to large settlements for fraud claims. The company mainly serves the automotive industry and is an important player on the I-35 corridor between Laredo and the Midwest.
Regional Summary Latin America and the Caribbean
The two peaks of incident occurrence in Latin America and the Caribbean were in March, followed thereafter by May. In addition to considerable volume of cargo theft and related incidents in Brazil in March, a major amplifier was the Argentine airline strike. As for May, progressively worsening logistics issues continued to accumulate in Venezuela amid the presidential crisis, resulting in production halts at major resource extraction and manufacturing enterprises, as well as the termination of aviation routes to the U.S.. Both October and November also experienced high volumes of incidents, when civil unrest brought about by anti-incumbent political demonstrations caused considerable logistic impediments in Colombia and the neighboring countries of Bolivia and Chile.
Across Latin America and the Caribbean, a majority of incidents were reported from South America where the highest reported numbers are from Brazil (28.9 percent), followed by Chile (14.3 percent), Argentina (10.7 percent), Colombia (6.8 per- cent), Peru (5.1 percent), Venezuela (4.1 percent), and Ecuador (2.6 percent). This largely reflects the socio-economic unrest experienced by these economies over the course of the year. Finally, included in the ‘Other’ section and accounting for 23.5 percent of the regional incidents are mostly Caribbean islands and countries in Central America. However, South American countries such as Bolivia, Guyana, Paraguay, and Uruguay are part of this grouping.
Across risk clusters, incidents categorized under civil unrest (20 percent), ground transportation (9 percent), and labor (6 percent) together accounted for 35 percent of all regional incidents. The increased levels of protests and industrial actions during 2019 contributed to these three risk clusters.
In October, a protest against the elimination of fuel subsidies in Ecuador rapidly grew into a continent-wide geopolitical crisis where a wave of massive protests erupted in Chile, Colombia, Ecuador, and Bolivia. Protesters across the region targeted major highways, production facilities (mainly copper and oil refineries), maritime ports, and airports to disrupt cargo transportation and halt industrial production to force their governments to respond to their concerns. Although the causes of the civil unrest in South American nations were related to country specific issues, deals with the International Monetary Fund (IMF) and accompanying austerity measures proved to be particularly unpopular and played an important role in the persistent demonstrations in the region. In most cases, protesters raised concerns over income inequality and government corruption.
Natural disaster and weather issues accounted for 16 percent of incidents by risk clusters. Six hurricanes formed over the course of the 2019 Atlantic hurricane season, with Hurricanes Dorian and Lorenzo reaching Category 5. On September 1, Hurricane Dorian, the second strongest Atlantic hurricane on record, made landfall in the Bahamas and caused substantial damage to infrastructure and left at least 70 people dead. Millions were left without power and dozens of roads were covered by water and debris, paralyzing ground transportation. Freeport, a major transshipment hub in North and Central America, closed all vessel and truck traffic for several days starting on August 30. A series of earthquakes and floods in Peru, Chile, and Colombia also contributed to this risk cluster.
|On September 1, Hurricane Dorian, the second strongest Atlantic hurricane on record, made landfall in the Bahamas and caused substantial damage to infrastructure and left at least 70 people dead.|
13 percent of all reported incidents by risk clusters in the region comprised of fires. The majority of these incidents were accidental, though some fires were started in the midst of the persistent civil unrest in South American countries and are believed to be intentional. One of the most significant incidents in this category occurred on October 13 in Benavidez, Argentina when a large fire completely destroyed the Braunco SA chemical factory. Local government officials made the decision to close the factory for ‘not guaranteeing the safety and hygiene of the establishment’.
Cargo thefts and earthquakes accounted for about 73 percent of the high impact events in the region. In particular, cargo theft remained the most prevalent issue in Latin America and the Caribbean, accounting for 38.7 percent of high impact incidents, and while law enforcement efforts were progressively dedicated to its interception, several hotspots remain throughout the region. In South America, Brazil maintained several hotspots for cargo thefts along the country’s Atlantic coast from Fortaleza to Porto Alegre, with a concentration of incidents on Avenida Getulio Vargas and surrounding roads in Sao Leopoldo, Cachoeirinha, and Avenida Brasil in Rio de Janeiro, and surrounding highways. Other hotspots in South America include Santiago, Chile; Avenida General Paz in Buenos Aires, Argentina; and Lima, Peru.
|Cargo thefts and earthquakes accounted for about 73 percent of the high impact events in the region. In particular, cargo theft remained the most prevalent issue in Latin America and the Caribbean, accounting for 38.7 percent of high impact incidents.|
In Central America, highways in Alajuela and San Jose, Costa Rica were highly impacted by cargo thefts. Although comparatively fewer cargo thefts occurred in the Caribbean, the majority took place in Jamaica, Dominican Republic, and Haiti.
Earthquakes accounted for 33.9 percent of high impact incidents in 2019 with perhaps the most impactful quake occurring on May 26 in Peru. The magnitude 8.0 earthquake shook Peru from the epicenter in the Reserva Nacional Pacaya-Samiria of the Amazon Rainforest and was felt from Colombia to Chile. The earthquake interrupted operations at state-owned oil company Petroperu’s Talara refinery and Frontera Energy’s oil block in Loreto. Petroperu reported that the earthquake created a leak in a pipe at its Talara refinery on the Pacific coast that the company said has since been controlled. It also suspended oil pumping at its Station 1facility in Loreto in order to evaluate damage it detected there.
Cargo transportation strikes and roadway blockades also had a substantial impact on the unimpeded movement of goods throughout the region. A notable incident occurred on May 17 in El Amatillo, on the border of El Salvador and Honduras.
A group of 1,000 transporters blocked access to roads connecting El Salvador to Honduras due to a newly implemented trade regulation. The incident left thousands
of transporters stranded at the border for several days and resulted in significant delays to international cargo deliveries.
|A group of 1,000 transporters blocked access to roads connecting El Salvador to Honduras due to a newly implemented trade regulation.|
Cargo transportation strikes, border delays/closures, industrial action, and production halts together accounted for 9.3 percent of high impact incidents. Many of these incidents directly correlate with the widespread anti-government protests previously mentioned. Several cargo transportation unions, oil workers, copper mine workers, aviation workers, students, port workers, and indigenous groups, among others, almost simultaneously participated in massive protests in Ecuador, Chile, Colombia, Bolivia, Argentina, and Venezuela, nearly paralyzing the movement of goods and trade in the region. One of the most significant incidents occurred on November 19 in Colombia where the Colombian government closed all land and river border crossings for 3 days in preparation for a planned nationwide strike against President Ivan Duque. All border crossings that separate Colombia from Ecuador, Peru, Brazil, and Venezuela were closed. Such socio- economic tensions had the cumulative effect of causing widespread transportation disruption in the region.
Notable Incidents From the Year
January: Dam breach in Minas Gerais disrupts the global iron ore supply. On January 25, the first dam of the Corrego do Feijao iron ore mine in Brumadinho, Minas Gerais, part of a wide complex of mines owned by the Vale S.A. company, breached and released a mudflow that left 259 dead. The breach disrupted Brazil’s iron ore supply, as well as that of the world market.
February: Presidential crisis in Venezuela leads to air, land, and sea border closures. The presidential crisis of January in Venezuela brought considerable logistics interruptions in February, in anticipation of a planned aid delivery from Brazil and Colombia to Venezuela on February 23. In anticipation of the delivery, opposed by the Maduro government for political reasons, the land, air, and sea borders were closed off.
March: Aviation sector strike disrupts air freight operations in Argentina. On March 13, a strike organized by the Asociación Argentina de Aeronavegantes considerably disrupted flight operations throughout Argentina, repeating the effects of an APLA and UALA strike earlier in January. The company affected was a subsidiary of Aerolineas Argentinas, and the strike caused considerable air shipping disruption throughout the country as well as to neighboring South American destinations.
April: Boeing 737 Max grounding disrupts postal operations in Jamaica. The effects of the Boeing 737 Max grounding continued to reverberate into April. The incident in question affected Jamaica Post, where the grounding order halted the service’s flight operations, causing considerable postal logistics impediment for the island country. Normal operations would not resume until May.
May: Panama Canal Authority issues prohibitive draft restrictions due to dry season. On May 7, the Panama Canal Authority announced draft restrictions of a maximum of 13.11 meters in the neo-Panamax locks due to a severe dry season, especially noted in Gatun Lake. The restriction would remain in effect until July 12.
June: Power outage interrupts operations at LNG company in Trinidad & Tobago. On June 16, a power outage hit the Atlantic LNG Company in Trinidad & Tobago, coinciding with a planned 20 percent capacity reduction at the plant due to a 3-year natural gas shortage at the 14.8 million ton per year facility. Operation resumed on June 18 to restore operations to pre-power outage levels.
July: Mining concession protests in Arequipa region disrupts port operations. The prospect of a license concession to the Southern Copper Corporation to operate the Tia Maria mine in Peru’s Arequipa region sparked what would become a long series of demonstrations on July 15. USD 500 million (EUR 450 million) worth of copper had its delivery delayed until the Ministry of Energy and Mines eventually suspended the license after nearly 1 month of demonstrations.
August: Battery factory shutdown sparks road-closing protests in greater Buenos Aires. The Arcynur, formerly Ran Bat, battery factory in the Buenos Aires area closed on August 5. Employees of the factory alleged that they were not given appropriate prior notice, and on August 21, in conjunction with employees of Coca Cola, Red Ridge, Siam, Canale, and LATAM, held a demonstration along Avenida Mitre that blocked access to the Pueyrredon Bridge.
September: The Bahamas face considerable destruction due to Hurricane Dorian. On September 1, Hurricane Dorian made landfall in the Abaco Islands of the Bahamas, proceeding to bring Category 5 winds across the islands, imperiling the majority of edifices, disrupting operations at the Port of Freeport, and submerging Grand Bahama International Airport.
October: Anti-austerity protests close roadways and interfere with petroleum production in Ecuador. In anticipation of a proposed public fiscal austerity program, nation-wide protests broke out across Ecuador. The height of the demonstrations saw the closure of the Unidad Nacional Bridge in Guayaquil, impeding its access to neighboring cities, as well as the force majeure declaration of Petroecuador due to demonstrator seizures of oil platforms in the Ecuadorean Amazon.
November: Election protests progressively close off and halt commerce throughout Bolivia. Following an election, demonstrations broke out across Bolivia that saw thoroughfares throughout the country progressively close, including the country’s border crossings with Brazil and Chile. Impeded commerce cost the country USD 167 million (EUR 150.83 million), USD 16 million (EUR 14.51 million) of which was attributable to shipping difficulties and production halts in Cochabamba.
December: Trump administration threatens to impose metal tariffs on Brazil and Argentina. As the U.S.-China trade war started to wind down with the signing of the Phase One Agreement, a brief crisis arose on December 2 when President Donald Trump threatened to impose tariffs on Argentine and Brazilian steel in response to weakened currencies. By December 21, after discussions with President Jair Bolsonaro, the Trump administration backed down from the tariff threat, although similar concessions have not taken place for the tariffs on Argentine steel.
Regional Summary Europe
Similar to 2018, the highest number of incidents in 2019 was reported in the month of March, when several labor disputes disrupted European air transportation across Belgium, France, Germany, Italy and the UK. The second highest number of inci- dents was reported in December, when a series of strike actions against a proposed pension reform in France began, that caused roads to be blocked, air traffic to be disrupted, and port activities to be halted. The months of January, October, and November also experienced a high number of incidents, mainly due to adverse weather such as heavy snowfall and storms. In early October, Hurricane Lorenzo made landfall in Ireland and the UK, flooding roads and cancelling flights at airports.
In 2019, most incidents were recorded in the UK, followed by Germany and France, which are the largest economies in the region. Together, the countries accounted for half of all incidents reported in Europe and a large part of that included incidents on cargo thefts, fires, and ground transportation disruptions. Following the top three countries are the Netherlands, Russia, Italy, and Spain all of which have significant manufacturing activities.
About one-quarter (26.5 percent) of all reported events in Europe fell into the ground transportation risk cluster, which includes subcategories such as border closures, roadway closures, and train accidents. Both road and rail are the dominant modes of transportation in Europe and highly sensitive to disruptions such as weather, protests, and accidents. Throughout the month of December, multiple key roads had been blocked almost on a daily basis by protesters across France as part of the still-ongoing strikes against the government’s pension reform. The collapse of a highway section connecting Savona and Torino in Italy due to flooding as well as a landslide caused by heavy rainfall near the city of Modane had severe supply chain impacts, blocking freight trains between France and Italy for almost one month.
Other clusters with a large number of incidents were fires, which include industrial explosions, as well as security events and civil unrest. Together, these made up for more than a third (36.8 percent) of all incidents. In terms of fires, two major industrial fires stand out. In September, a large blaze at specialty chemicals maker Lubrizol in Rouen resulted in a lockdown of the port area and caused ripple effects through petrochemical supply chains in Europe. Three months later, a fire at Tier-1 component supplier Faurecia disrupted supplies of car dashboards for weeks that were produced for models of Audi and Seat, both part of the Volkswagen Group.
|In September, a large blaze at specialty chemicals maker Lubrizol in Rouen resulted in a lockdown of the port area and caused ripple effects through petrochemical supply chains in Europe.|
Among the most prominent security events were terror incidents such as the bomb attack in Lyon in May and the stabbing attack on London Bridge in November. As for civil unrest, disruptions were mostly experienced as part of the pro-independence movements across Catalonia during the months of October and November, which resulted in violent clashes with police forces, the lockdown of entire commercial and industrial areas, as well as multi-day roadblocks on keyhighways and border crossings in the region.
Across the Everstream Analytics portfolio of high impact events, industrial fire incidents (34 percent) were particularly widespread in 2019, causing property damage and downing production lines. In some cases, such events forced organizations to move production lines to other plants which caused additional delays. For instance, a large fire on December 29 at automotive supplier Muehlhoff destroyed several manufacturing areas, forcing the company to move production machinery to other facilities to continue supplying customers.
Cargo and warehouse theft incidents accounted for the second largest group of high impact events at 21 percent, with electronics and consumer goods being among the most targeted product groups. Two such incidents that stand out include a theft of EUR 3 million (USD 3.3 million) worth of electronics products from a warehouse near Amsterdam Schiphol Airport in June as well as theft of perfume worth EUR 2.1 million (USD 2.3 million) from a truck parked on a German highway service area near the city of Magdeburg in December.
Ground transportation advisories were the third most reported events (9 percent), which include truck driving restrictions during adverse weather events. These were particularly common in January and November across France as heavy snowfall and dangerous driving conditions prompted authorities to issue driving bans for trucks on highways and interstates in numerous regions.
Supplier-related insolvency incidents made up the fourth largest group (8 percent) of high impact events of 2019, many of which affected metal and plastics processing companies. Among the dominant reasons given for the insolvency filings were reduced demand and late payments from automotive customers.
Notable Incidents From the Year
January: Wacker Chemie declares force majeure at rubber production facility in Burghausen. Specialty chemicals maker Wacker Chemie AG was forced to declare force majeure for one month on its solid silicon rubber production in Burghausen due to an equipment breakdown on January 7. Among the materials produced at its affected plant were Elastosil, Powersil, Silmix and Cenusil, which are used for applications in the semiconductors, electronics, cosmetics, and automotive sectors.
February: Dockworker strike cripples shipping operations at Swedish ports. A series of strike actions by port workers with the Swedish Dockworkers’ Union at more than a dozen Swedish ports severely delayed shipping operations across the country in January and February 2019. The work stoppages ranged from several hours to one day and were particularly impactful at the major port of Gothenburg, which has multiple ferry services for roll-on roll-off shipments to Germany, Belgium, and the UK.
March: Fire-stricken container ship Grande America sinks off the coast of France. On March 10, the container ship Grande America caught fire off the Atlantic coast of France while on its way from Morocco to Germany. After all 27 crew members were rescued, the ship finally sank two days later, destroying 345 containers and dozens of vehicles and causing an oil spill that threatened the coastline of France. The sinking led car maker Porsche to reactivate the production line for the Porsche 911 as the last units disappeared with the ship and could not be handed over to their customers.
April: Contamination of key pipeline disrupts crude oil production across Europe. On April 19, reports emerged of contamination of crude oil that is transported via the Druzhba pipeline from Russia to refineries in Eastern and Central Europe. Despite a series of mitigation measures, the contamination continued for several months until July 2019, severely limiting crude oil supply that forced chemical and petrochemical plants to reduce production rates. Among the affected companies, both Domo Chemicals and Total declared force majeure at their plants in Leuna, Germany which is located at the pipeline’s northern branch.
May: British Steel files for insolvency due to excessive debt. High debt levels of more than EUR 1 billion (USD 1.1 billion) caused British Steel, the UK’s second largest steel producer, to be placed into administration – the British form of insolvency proceedings – by a judicial court on May 22. Citing uncertainty over Brexit and weak demand as the main reasons, the company has so far not received a government-funded bailout. Takeover negotiations with Chinese steel company Jingye Group are still ongoing in early 2020.
June: Ransomware halts worldwide production at Tier-1 aerospace supplier ASCO Industries. On June 7, Belgium- based aircraft parts manufacturer ASCO Industries suffered a ransomware attack which halted production lines at four factories in Europe and North America. The company was forced to temporarily furlough about 1,000 employees. It took Asco more than a month to fully resume production.
July: Systems supplier Eisenmann Group files for insolvency over pricing battle in Germany. One of the largest companies filing for insolvency in 2019 was Germany-based Eisenmann Group, which employs more than 3000 people at 27 locations worldwide. The company produces machines and components for the automotive and engineering sectors, including for customers such as Lamborghini and Tesla. Among the reasons for the financial difficulties was reportedly a pricing battle over new projects with its main competitor Duerr AG.
August: Low levels on the Rhine River increase shipping costs, again. For a second year in a row, water levels on the Rhine River were low for an extended period of time from July to September, approaching the 135 centimeter mark near the city of Coblence several times. At this mark, river barges can only be loaded with about 50 percent of their normal capacity. Shipping companies such as Maersk Line thus imposed low water surcharges to cover for higher transportation costs. Contrary to 2018, however, shipping was not stopped due to the lower water levels.
September: Large fire at U.S. chemical maker Lubrizol shuts down port area in Rouen. A fire that broke out on September 26 in a storage facility of U.S. specialty chemical maker Lubrizol in Rouen burned over 9,000 tons of chemicals, oil, and fuel additives in one of the most significant industrial accidents inFrance in recent years. Following months of investigations and a complete production stoppage, the company received approval to partially restart operations in December, albeit with no indication of when full operations would resume.
October: Transportation strikes cause significant cargo delays across Italy. The month of October was marked by several transportation strikes that impacted supply chains operations across Italy. A general strike in which 30,000 people participated on October 24 and 25 disrupted ground and air transportation, with toll booth workers and flight controllers joining the strike. The disruption in the aviation sector came just two weeks after Alitalia pilots and flight attendants held a 24-hour strike over the uncertain future of the airline. The Port of Genoa, one of Italy’s container gateways, was similarly hit by several work stoppages and further threats in the latter half of the month.
November: Fire at dashboard supplier Faurecia disrupts car production schedules in Barcelona. On November 20, a large fire damaged parts of a factory near Barcelona that belongs to the French auto parts supplier Faurecia, disrupting its own production lines as well as production schedules at several plants nearby due to a dashboard shortage. To restart production lines, Faurecia brought in new equipment from France and moved staff and production to other plants in Germany and the Czech Republic.
December: Strike against pension reforms cripples cargo movements across France. Throughout the month of December, unions from various sectors organized a series of strikes against a proposed pension reform that brought France to a near standstill for a major part of the month. With port and rail workers joining the strike, ocean and rail cargo movements were significantly disrupted forcing shipping companies to skip port calls and divert cargo to Belgian ports, while industries such as grain producers drastically reduced production.
Regional Summary Africa and The Middle East
In 2019, the highest number of incidents in the Africa and Mid- dle East region was recorded in March, while February experi- enced the lowest. The spike in incidents can largely be attributed to the impact of Cyclone Idai, which is considered to be one of the worst tropical cyclones on record to hit Africa and the Southern Hemisphere. Between March 4 and 21, it caused significant damages to infrastructure and human life across Madagascar, Malawi, Mozambique, and Zimbabwe. Incident numbers remained similarly high in April as anti-government protests continued in Algeria and Sudan, where president Omar al-Bashir was ousted on April 11, and a new wave of protests and civil disturbances against poor service delivery standards swept across several urban areas of South Africa.
Most incidents recorded by Everstream Analytics in the Middle East and Africa region occurred in South Africa, followed by Nige- ria. The two countries’ statuses as Africa’s largest economies, along with South Africa’s advanced transport infrastructure and its strategic maritime location as well as Nigeria’s ener- gy-focused economy, explain their importance in supply chain activity as well as their exposure to disruptions. Secondary markets in the region were led by Israel and Kenya, followed by Iraq, Egypt, and Syria, where a high number of security- related incidents were recorded.
Across the Middle East and Africa, civil unrest (18 percent) and ground transportation (7 percent) risk clusters represented one-fourth of all incidents observed in the region, mainly triggered by large protests that swept across countries such as Lebanon, Sudan, and Iraq for weeks and severely disrupted cargo transport activities. Mass protests on the streets of Algeria and Sudan in the first half of 2019 resulted in the resignation of their presidents after decades in power, while ongoing anti-government protests in Lebanon has caused significant disruptions to road transportation since they first broke out in late September. In South Africa, economic discontent resulted in challenges to ground transport when truck drivers’ dissatisfaction turned into a series of violent attacks on trucks along the country’s major transport routes.
In addition, the regions continued to face a large number of security (8 percent), terrorism (6 percent), and war (4 percent) related incidents due to often longstanding military tensions across the continent. One of the most notable examples includes the drone attacks targeting a Saudi Aramco-operated oil field in the Abqaiq oil processing facility and the Khurais oilfield by Yemen’s Houthi rebels, which temporarily reduced oil production by around 50 percent in September. Meanwhile, political tensions between Iran and the United States resulted in temporary seizures and rocket attacks on tankers crossing the Strait of Hormuz in June and July.
While maritime incidents make up a relatively small risk cluster (4 percent), some notable developments took place in the region in 2019. Many major seaports in the region faced congestion issues that severely impacted their productivity levels. Although a go-slow strike by South African port workers in June disrupted Transnet’s container terminals for weeks, congestion at Nigeria’s main seaports Onne and Apapa was further intensified at the end of the year after the country’s unilateral decision to close its land borders in October. In addition, the Gulf of Guinea saw a surge in pirate attacks on oil tankers and cargo vessels, with Nigeria being the worst affected country in the region.
Everstream Analytics recorded a large volume of high impact events in the Middle East and Africa region throughout 2019, led by industrial fire (19 percent), flooding (17 percent), and port- related incidents that include port closures, port congestion, and port disruptions (29 percent). A high-profile industrial fire incident in the region includes a large explosion at a ceramics factory in December that resulted in over 20 fatalities and more than 130 injured workers. The most impactful flooding event occurred in Nigeria where over 300,000 people were affected in November due to the River Kaalia breaking its banks in Cameroon. According to the United Nations, the flooding was the worst in seven years, leading to authorities issuing the highest alert to southern states.
The high number of port-related disruptions (29 percent) can be explained by the region’s strategic position at the crossroads of major shipping routes, such as the Strait of Hormuz, the Suez Canal, and the Cape of Good Hope. Powerful cyclones were responsible for several disruptions at ports such as Cyclone Idai off the coast of Mozambique and Tanzania in March, and Cyclone Kyarr in the Arabian Sea in October. In addition, severe weather events regularly led to closures at Saudi Arabia’s Port of Jeddah and South Africa’s Port of Durban.
|Powerful cyclones were responsible for several disruptions at ports such as Cyclone Idai off the coast of Mozambique and Tanzania in March, and Cyclone Kyarr in the Arabian Sea in October.|
Cargo and warehouse thefts (13 percent) have experienced an increase in the region in comparison to those reported in 2018 (around 5 percent), especially in South Africa, where cargo truck hijackings were frequently reported. In February, cigarettes worth USD 50,000 (EUR 45,289) were stolen during the hijacking of a courier truck in Port Elizabeth. Stolen cargo also included medicines and electronic goods.
Notable Incidents From the Year
January: General strike disrupts rail, air, and sea operations across Tunisia. On January 17, workers with the Tunisian General Labour Union (UGTT) staged a nationwide general strike in major cities including Tunis, Sidi Bouzid, Gafsa, Jendouba, and Sfax to demand higher salaries in the public sector. The protests disrupted rail and airport transport as well as port operations across the country for one day.
February: United Arab Emirates partially lifts ban on Qatari- origin shipments. The United Arab Emirates (UAE) partially lifted a ban on Qatari shipping on February 20, easing sanctions which were imposed in June 2017. Following the lifting of the ban, Qatari-origin cargo was again able to enter the UAE’s ports. The sanctions came as a result of escalating tension which led to the severing of diplomatic ties between Qatar and other countries in the Middle East, including Saudi Arabia and the UAE.
March: Anti-government protests cause widespread disruption in Sudan. Severe anti-government protests demanding the resignation of Sudan’s President Omar al-Bashir started in December 2018 and lasted until August 2019. The demonstrations led to a series of disruptions across the country, the declaration of a nationwide state of emergency in March, and the ousting of the president in April. Freight movement in the country was impacted due to blocked roads and a 24-hour closure of Sudanese airspace. Operations at the Port Sudan were also completely halted, with thousands of containers stranded at the port.
April: Opening of new airport disrupts cargo movements in Istanbul. In early April, airport operations finally moved from Ataturk Airport (IST) to Istanbul New Airport (ISL) following several postponements. The transfer of operations lasted for almost 48 hours between April 5 and April 7, with major highways closed and both airports operating at reduced capacity. Numerous flights were delayed or canceled between April 5 and April 20, which led to delays of air cargo shipments.
May: Fuel shortages disrupt transport activities across Angola. A prolonged fuel shortage led to long queues at petrol stations in Benguela, Huambo, and Luanda provinces and significantly disrupted road transport activities across Angola in early May. Other sectors also faced reduced productivity due to labor abstinence and equipment shutdown caused by the fuel shortage. The shortages were reportedly due to declining foreign exchange reserves amid fluctuating economic conditions, which made it difficult for Angola to sufficiently import refined oil products.
June: Tankship operators suspend bookings after attacks in the Persian Gulf. Several tankship operators temporarily suspended bookings for vessels transiting the Gulf of Oman and the Persian Gulf following attacks on Japanese-owned and Norwegian-owned tankers in the Gulf of Oman on June 13. Both tankers were reportedly attacked with naval mines and sustained fire damage. Similar incidents occurred in May when three oil tankers and a bunkering ship were attacked off the coast of the United Arab Emirates.
July: Congolese army evicts illegal miners from Glencore’s Kamoto Copper Company. At the beginning of July, security forces evicted thousands of illegal miners from a copper and cobalt mine run by Glencore’s majority owned subsidiary Kamoto Copper Company (KCC), sparking angry protests. Glencoreestimated that about 2,000 illegal miners entered the mine per day. While the incident seemed to have no direct impact on production or prices, it further underscored the unstable conditions Glencore’s copper and cobalt businesses face in Africa.
August: Thieves steal goods worth ZAR 300 million from Richemont warehouse in Johannesburg. On August 11, a group of thieves robbed a Richemont jewelry warehouse in the city of Sandton in the greater Johannesburg area. The armed thieves held the guards at gunpoint and removed ZAR 300 million (USD 19.5 million; EUR 17.6 million) worth of jewelry from the site. The theft in Bryanston was considered the biggest of the year.
September: Major highways and roads blocked in cities across Lebanon amid protests. Starting September 29, demonstrators started to block major roadways in Beirut, Tripoli, and other parts of Lebanon amid anti-government protests which affected operations at Beirut Rafic Hariri International Airport and the Port of Beirut. Protests have continued into January 2020 due to the deteriorating economic situation.
October: Auto parts supplier Cablisys Morocco files for judicial restructuring. On October 31, automotive supplier Cablisys Morocco (former Sonocable) filed for judicial restructuring at the commercial court of Casablanca, Morocco due to a liquidity shortage. The company specializes in the production of electrical harnesses, power cords and electrical assemblies. Morocco is North Africa’s biggest automotive hub and major car makers such as Renault and PSA Group have plants in the country.
November: Nembe Creek oil trunk pipeline shuts down due to sabotage. The Nembe Creek oil trunk pipeline in Nigeria was again shut down due to sabotage in mid-November. Throughout 2019, the pipeline faced intermittent closures that resulted in multiple force majeure declarations and a shutdown of 2 months due to sabotage and other disruptions. The Nembe Creek line is one of the two major pipelines exporting Bonny light, one of the major crude grades in Nigeria.
December: Ports in Nigeria face extreme congestion. Nigeria’s major seaport, the Lagos Port Complex, faced berthing times of up to 28 days throughout December, which were caused by a combination of equipment breakdown, existing congestion at the yard, and poor road conditions leading to the port. Moreover, Nigeria’s unilateral decision to close its land borders in October further intensified existing congestion issues in Lagos as well as other Nigerian seaports.
Regional Summary Asia Pacific
Across the Asia Pacific, the period between July and December saw a higher number of incidents compared to the first half of 2019. This can be attributed to the peak period of the annual tropical cyclone season in Asia, along with natural disasters such as heavy rainfall and flooding that disrupted logistics operations. In particular, the sheer size and scale of the Indian and Chinese economies, together with their trade and manufacturing activities in the region, help explain the number of supply chain disruptions reported. Other events include bilateral trade restrictions between South Korea and Japan as well as between China and the U.S., nationwide port strikes in Australia, and long- running pro-democracy protests in Hong Kong.
The top incidents recorded in the region were in India, China, and Australia. In total, these three countries accounted for about 43 percent of all incidents reported in Asia Pacific. Out of the 46 countries in the region, Japan, Philippines, Indonesia, Pakistan, and South Korea followed with the most number of incidents reported.
The large majority of incidents recorded in 2019 in the Asia Pacific region were across the fires (17.5 percent), natural disasters (13.1 percent), and ground transportation (9.6 percent) risk clusters. Everstream Analytics recorded a large volume of small to large scale industrial and non-industrial fires throughout the year, including China’s Xiangshui chemical plant explosion in March and a factory fire in Delhi, India which killed 43 people and injured 50 in December.
As a number of countries in the region are situated along the Pacific Ring of Fire, earthquakes, volcano eruptions, wildfires, and drought are more common in comparison to other regions, with the natural disaster risk cluster having the second highest reported events. Chennai and other regions of the Tamil Nadu state in India faced significant water shortages in mid-2019 due to a lack of rain while unprecedented wildfires affected several states across Australia from September 2019 into early 2020. The wildfire activities resulted in severe highway closures for several weeks, particularly in New South Wales, Victoria, and Western Australia states.
Ground transportation followed closely as the third highest risk cluster, as numerous ground transportation advisories were issued due to protests, adverse weather conditions, and environmental measures. Some noteworthy events that led to such advisories include the G20 Summit in Osaka, as well as the ban on diesel generators and implementation of odd-even road license plate traffic rotation scheme in Delhi to control smog in October and November. Moreover, protests in South Asia normally lead to a partial or full closure of highways; such examples include nationwide protests by garment workers in Bangladesh that disrupted the Dhaka-Tangail highway in September and automobile workers blocking a section of National Highway 48 in Gurgaon, India in late 2019.
Everstream Analytics also recorded a large volume of impactful events in the region, covering risk clusters such as weather (6 percent) and aviation (5.4 percent). Significant cyclones and typhoons that caused widespread disruptions to ports, aviation, and manufacturing facilities include Cyclone Fani, Cyclone Vayu,Typhoon Faxai, and Typhoon Hagibis. Typhoon Faxai battered Tokyo Bay and cut power to 934,000 households in Chiba Prefecture and 730,000 households in Tokyo. Many chemical, petrochemical, and electronics manufacturers were forced to halt production as a result of the blackouts. In the aviation sector, Everstream Analytics reported various flight cancellations and delays arising from tropical storms and aviation workers’ strike, including a dispute between the management of Taiwan’s EVA Airlines and its workers that lasted several months and resulted in the cancellation of 550 flights.
In the Asia Pacific region, earthquakes account for 37 percent
– the highest – of all high impact events that were covered. This is because eight out of ten major earthquakes in 2019 with the highest number of casualties were from Indonesia, Pakistan, Philippines, and China. The figure also accounts for earthquakes with lower magnitudes from countries like Japan and New Zealand. Subsequent disruptions caused by earthquakes such as structural collapse, roadway disruption due to debris, and power outages also affected manufacturing and logistics operations.
Industrial fires were the second notable risk category of importance with 28 percent of coverage as fires continue to be a major disruption to supply chain operations. Short-circuit failures, lack of workplace fire hazard safety standards, and absence of discipline by employees in disposing cigarettes on the premises continue to be the main cause of fire outbreaks.
With port strikes often being a precursor, port congestion in Asia Pacific during the year was mostly contributed by natural disasters, adverse weather situations, and long holidays and account for 7 percent of all high impact events. In May 2019, ports in India and Bangladesh experienced temporary port closures due to back-to-back cyclones, thus leading to congestion for several days. Similarly, ports in Japan faced a series of tropical storms and typhoons from May until November while northeastern ports in China normally experience low visibility from fog resulting in berthing delays. Long holidays, such as the Lunar New Year, Ramadan, and China’s Golden Week, as well as changes to the customs regulations for coal and scrap imports led to additional port congestions in 2019.
|In May 2019, ports in India and Bangladesh experienced temporary port closures due to back-to-back cyclones, thus leading to congestion for several days.|
While the share of flooding (7 percent) events has slightly decreased compared to 2018, it still ranks in the top three categories that continue to affect supply chains across the region. Flooding, in most cases, is a by-product of tropical storms as it occurs during torrential rainfalls after the passage of a storm. Japan, China, and India faced extreme flooding conditions in 2019, resulting in casualties and roadway disruptions.
Customs regulation (3 percent) and trade restrictions (3 percent) ranked relatively lower than the other risk categories, but nevertheless played important roles in triggering secondary disruptions such as port congestion, customs delays, and production halts (6 percent). Since China banned the import of certain scrap metals and plastics, a series of customs regulations were introduced at some ports while Malaysia, Philippines, Indonesia, and Vietnam followed suit by also imposing customs regulations to halt the import of scrap shipments from other countries.
In addition to the ongoing trade war between the United States and China, bilateral tensions between South Korea and Japan escalated in July 2019, when Japan announced its plan to tighten export of high-tech materials used in semiconductor chip and smartphone productions to South Korea over long- standing political rows. The export control measures not only targeted the global semiconductor industry but also threatened South Korean and Japanese chip makers and electronicsmanufacturing worldwide.
Notable Incidents From the Year
January: Garment factories halt production as protests break out in Dhaka. In early January, Bangladeshi garment workers began protesting over the government’s wage increment plans with at least 100 garment factories in Dhaka, Gazipur, and Savar being forced to halt productions due to safety concerns. Vehicle movements on highways were also severely disrupted including on the Zirabo-Bishmail, Dhaka-Aricha, Dhaka-Tangail, Abdullahpur-Baipail and roads leading to the airport.
February: Thailand temporarily suspends operations at 600 factories due to heavy air pollution in Bangkok. In early February, local authorities temporarily shut down 600 factories in response to an on-and-off smog conditions in the city that caused firms to reduce production or suspend factory operations nationwide. Operations at up to 1500 factories slowed down by 25 to 30 percent from its average production rates as authorities believed that the drop would alleviate air pollution by 50 percent.
March: Johor River contamination heightens water scarcity risks in Malaysia. In March 2019, two factory owners and a truck driver believed to be from an illegal tyre recycling factory were charged over the illegal dumping of 20-40 tons of chemical wastes into the Kim Kim River in Johor, Malaysia. The incident caused over 2,000 people from Pasir Gudang town to fall ill after inhaling methane gas from the toxic discharge.
April: Chinese authorities close Xiangshui Chemical Park following major explosion in Yancheng, Jiangsu. The Yancheng government in Jiangsu Province ordered the shutdown of the Xiangshui chemical industry park following an explosion that killed 78 people on March 21. The Jiangsu provincial government also issued a plan on April 1 to rectify and upgrade the chemical industry, which plans to cut the 50 chemical parks in the province to 20 and reduce the number of enterprises to less than 1,000 by 2022.
May: Cyclone Fani shuts down ports in India and Bangladesh. On May 3, Cyclone Fani made landfall near Puri in Odisha as the strongest storm to hit India in 20 years. The storm later moved towards Bangladesh, causing power outages for more than 3 million people and ports along its path to shut down for several days. Among the affected ports were Paradip, Visakhapatnam, Kolkata, and Chittagong.
June: Severe flooding in South China damages roads and bridges. Severe rainfall across South China in June affected 6.75 million people and caused more than 80 casualties. 22 provinces were hit by heavy rainstorms and flooding, with the provinces of Guangdong, Jiangxi, Fujian, and the Guangxi Zhuang Autonomous Region worst affected.
July: Dockworkers carry out industrial strike at DP World Australia terminals. More than 1,800 workers at container terminals of DP World Australia carried out industrial action in protest against automation, outsourcing, and cuts to income protection insurance. Terminals in Sydney, Fremantle, Brisbane, and Melbourne were affected.
August: Pro-democracy protests halt operations at Hong Kong International Airport. Since August 12, thousands of anti-government demonstrators occupied Hong Kong International Airport, causing the world’s busiest cargo airport to grind to a halt, with over 300 flight cancellations. Some cargo carriers that reported flight cancellations on August 13 include Yangtze River Express, China Cargo Airlines Ltd., UPS, Airbridge Cargo Airline, and SpiceJet. The flow of cargo to Ontario, Chengdu, and Shanghai were adversely impacted.
September: Truck drivers go on strike at Port of Chennai. A strike initiated by truck drivers with the All Trailer Owners Association on September 16 caused both import and export container movements at the Port of Chennai to experience delays.
October: Long Tau River closure and draft restrictions affect cargo capacity. Cargo vessels with port calls at Cat Lai Container Terminal in Ho Chi Minh City, Vietnam faced disruptions in freight movement and restrictions on capacity due to delays in vessel schedules after Long Tau River was closed temporarily on October 19 as a result of a maritime accident.
November: Korean Railway Workers’ Union launches five-day general strike action. From November 20-25, the Korean Railway Workers’ Union went on a five-day general strike action over demands for additional staff and salary increases. The strike reportedly cost the state-run railway operator Korean Railroad Corporation (KORAIL) around KRW 2 billion (USD 1.7 million; EUR 1.5 million) and resulted in nationwide rail services for cargo to be severely disrupted.
December: Numerous road closures reported in New South Wales and Victoria due to bushfires. On December 31, numerous road closures were reported throughout New South Wales (NSW) and Victoria including Princes and Monaro Highways due to soaring temperatures and strong winds. Very high fire danger was also forecast for nine NSW regions, including Greater Hunter and central and southern ranges as well as for Australian Capital Territory (ACT).
Making Sense of Supply Chain Risks
Each year, Everstream Analytics highlights the key events that affect supply chain operations around the world. While not all those events have the same impact, some recurring themes are evident as we look back on the past 12 months.
2019 proved once again that the supply chain risk environment is continually changing and evolving. Last year, companies were challenged by a dramatic escalation in trade tension, and by sophisticated and large-scale cyber-attacks. At the same time, production and logistics operations had to cope with a broad range of disruptive events, including natural disasters, industrial fires and explosions, production restrictions, labor disputes, port disruptions, and cargo and warehouse theft.
Trade restrictions – including new tariffs, export control regulations, sanctions, and other non-tariff barriers – emerged as a major recurring theme that had considerable impact on global supply chains. Typically a risk overseen by trade & compliance functions, this has become an area that supply chain professionals need to monitor closely, as geopolitical tensions threaten integrated supply chains and the connections between once closely linked economies.
Events impacting production and supply chain operations in the form of industrial zone shutdowns, force majeure, production halts, and insolvencies also featured prominently throughout 2019. Factors impacting production included natural disasters, supply shortages, and industrial accidents such as fires and explosions that forced firms to either restrict or halt output. Insolvencies were particularly prevalent last year, as industrial firms and their suppliers continued to face financial pressure amid declining commodity prices, trade disputes, and slow overall growth.
Production halts and industrial zone shutdowns were widely reported in Asia Pacific countries, as governments in emerging markets strived to balance economic growth with more stringent environmental measures aimed at limiting industrial pollution.
|Insolvencies were particularly prevalent last year, as industrial firms and their suppliers continued to face financial pressure amid declining commodity prices, trade disputes, and slow overall growth.|
Industrial action and civil unrest had significant impacts on supply chains over the past year. Strikes and protests were the cause of major disruptions to industrial production. Highways, ports, airports, and logistics hubs are also becoming an increasingly popular target for activists, interrupting the movement of cargo via air, land, and sea.
Supply chain disruptions due to cyber-attacks will continue to pose a serious threat to supply chain organizations. Last year major companies in sectors including the automotive, technology, pharmaceutical and chemicals industries were affected by ransomware, data breaches, and the activities of Advanced Persistent Threat (APT) groups. Increasingly, these attacks are hitting technical infrastructure, such as industrial control systems, in addition to their more traditional targets incorporate IT networks. A renewed effort to understand, assess, and mitigate these risks will gain further importance in the coming years. Managing the cyber risk for supply chain operations will require greater collaboration both within the organization and across the entire supply chain network.
Although cargo and warehouse theft trends can vary from region to region, the impact and damages suffered by supply chain organizations remain significant. Cargo theft is often correlated with other criminal activity, and with regions suffering from heightened socio political instability, so monitoring these factors can provide important leading indicators for companies.
Natural disasters and weather-related events continued to provide plenty of challenges last year, with every region facing its own share of disruptions. January and July saw the highest number of events reported by Resilience360. Their intensity, however, proved to be higher than previous years. Climate change isincreasing both the severity and unpredictability of natural disasters and weather incidents, from droughts, low water
levels, and wildfires to hurricanes and tropical storms.
In 2019 Everstream Analytics has introduced a number of new event categories to reflect the changing nature of supply chain risks:
- Weather-related events such as hail and heat waves have recently resulted in significant disruption and even halted cargo transportation and port operations. Hail and heavy rainfall can disrupt road travel and damage vehicles and buildings.
- Postal disruptions have also come to the forefront of the supply chain risk landscape, with high volume parcel shipments and e-commerce operations being hit by industrial action, IT service disruptions, and natural disasters.
- Truck driving bans have also become more commonplace as governments step up their efforts to limit pollution through more stringent environmental and industrial safety restrictions on heavy-duty vehicles and those transporting hazardous goods. Road transport has also been affected by weather-related events such as winter storms or wildfires, as authorities close major routes as a protective measure.
The experts at Everstream Analytics are committed to continually reviewing and assessing the relevance of the risks that we monitor and assess. As the supply chain risk landscape changes, we update our monitoring and reporting approach to ensure our users get the information and insights they need.