Middle East crisis sparks supply chain innovation

Earlier this year, there were reasons for Egypt to be optimistic about ocean shipping lines returning to the Suez Canal as the threat of attacks on ships by Houthi militia in Yemen receded.

However, such hopes were shattered by the outbreak of war between in the Middle East.

Now the country is emerging as an international intermodal transit hub for freight originating in Europe, bound for the Gulf states, that would ordinarily be transported on containerships routed via the Red Sea and Strait of Hormuz.

‘Reliable Alternative to Traditional Pathways’

A ro-ro cargo corridor launched in 2024 between Trieste, in Italy, and Egypt’s Mediterranean port of Damietta, now extends to the port of Safaga, on the western bank of the entrance to the Red Sea.

Trailers are transported from Damietta to Safaga by truck, from where trailers are transferred to Ro/Pax vessels which cross the Red Sea to the port of Neom, in Saudi Arabia, and then onward by truck to the UAE, Kuwait, Oman, Iraq, and the wider Gulf Cooperation Council (GCC) nations.

Launched by Egyptian shipping and logistics services group Pan Marine last month and supported by the ports of Damietta, Safaga, and Neom, and Danish ro-ro operator DFDS, alongside regional logistics partners, the extended corridor is marketed as “a fast and flexible route for European cargo entering the region, combining trucking and ferry‑based freight services to offer a reliable alternative to traditional pathways”.

Coordination between Damietta Port Authority, Pan Marine customs officials and other stakeholders has contributed to speeding up operational and clearance procedures through the use of digital systems.

The new route builds on a successful intermodal ‘pilot’ last year, which connected Egypt via Safaga, to northern Saudi Arabia via Neom and onwards to Iraq, via the Saudi-Iraq Arar border.

DFDS’ Ro/Ro service linking Trieste and Damietta has a weekly capacity of up to 420 trailers. Pan Marine’s Ro/Pax vessel Pan Lily, with capacity for 130 trucks and 100 cars per voyage, operates four fixed weekly seven-hour sailings from Safaga to Neom.

The service is tailored to carrying time-sensitive cargo, FMCG, dry and refrigerated food products and perishables, industrial equipment, and e-commerce shipments, as well as “any cargo requiring faster transit than conventional container routing”.

The main European origins of goods to date are Italy, the UK, Germany, and Poland.

Extraordinary Logistics Challenges

One company immediately impacted by the outbreak of hostilities in the Gulf region was Dubai-based grocery store chain Spinneys.

Last week, on the occasion of the presentation of its Q1 earnings results, the retailer gave an insight into how it

has coped with the extraordinary logistics challenges it was all of sudden faced with from March this year.

Amid the geopolitical tensions which disrupted air and sea freight routes, Spinneys had to innovate rapidly to maintain product availability across its expanding 93-store network.

While air freight was initially severely affected – freighters being the only option to move goods – within days Emirates and Etihad Airways had secured capacity on passenger aircraft, enabling the company to keep high availability on fresh products, Spinneys explained.

As for ocean freight, with ports in the Arabian Gulf, inaccessible, such as Jebel Ali and Khalifa, all sea freight has been redirected to ports on the east coast, causing heavy congestion as these alternative maritime gateways were not designed to handle such a volume of containers.

Port congestion led the ocean carriers to call end-of-voyage for some shipments in India and Sri Lanka, adding significant delays and additional costs for feeder vessels and road transport.

Only 20% of the shipments planned for March were received during that month, with average delays of 21 days.

Additional surcharges on containers, increases in fuel prices and freight cost have impacted landed cost significantly weighing on gross margins.

“High air freight rates and uncertain ocean lead times forced us to test a road freight option from the UK to the UAE, which was successful and will remain post-crisis time as an option for previously air freight medium shelf-life products from Europe,” Spinneys noted.

Three-Week Long Itinerary

This has consisted of creating a road-sea logistics corridor of more than 3,700 miles for trucks carrying trailer-loads of foodstuffs, crossing several mainland European countries.

From the port of Trieste, the trucks take roro-ships to Egypt and them onward by road-sea-road transfer to the UAE.

The three-week long itinerary may seem long, but it was comparable with current ocean freight transit times from Europe around Africa given the potential disruption at the southern end of the Red Sea, Spinneys Dubai’s general manager, commercial, Tom Harvey, told local media on the launch of the corridor.

"In fact, it may even be slightly quicker," Harvey said. "This route helps us reduce congestion at some ports and maintain stable supplies on shelves.”

620,000 Ton Air Cargo Shortfall

Separately, the military conflict in the region saw nine Middle East airports suffer a combined loss of 620,000 tons of cargo across the two months from end-February to end-April – a decline of 52% year on year.

April showed indications of partial recovery, with 312,000 tons handled, but that is still 43% below last year.

These are among the major findings of “a comprehensive assessment” commissioned by the regional branch of airports body, Airports Council International, published last week.

The airports in the assessment sustained a combined revenue shortfall of between $900m and $1bn over the two months as passenger and cargo volumes fell 55% on the budgeted target.