Confidential. © 2020 IHS Markit®. All rights reserved.Confidential. © 2020 IHS Markit®. All rights reserved.
Cargo Risks Outlook
2020Joint Cargo Committee Forum
12 February 2020
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Cargo Risks Outlook 2020
2
Prospects for War in the Gulf
Competition in the Eastern Med
Civil Unrest in Latin America
Piracy in the Gulf of Guinea
Impact of Novel Coronavirus
Q&A
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Prospects for War in the GulfFiras Modad - Director, Head of Middle East & North Africa
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Strategic Shift Rather Than Isolated Event
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New rules of engagement
• Proxy fights AND direct confrontation
• Arab Gulf energy infrastructure at risks
Cycle of escalation without off-ramp
• All-out-war risks
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The Iranian Playbook: Death by a Thousand Cuts
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Iraq: Re-launch Shia anti-US insurgency, distracting from IS fight; force US out politically
Yemen: Sink Saudi tanker, ships, strikes on GCC infrastructure
Gulf states: Terrorism, harassing aviation, targeting US personnel to raise cost of US alliance and bases
Israel: Pressure via Syria, Gaza – Iran keeps Hizbullah’s powder dry
Nuclear: Create a crisis that forces mediation
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Scenarios Point to ‘Difficult to Control Confrontation’
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Controlled
Confrontation
15%35%40%
All-Out War US De-escalatesUS Pressure
Succeeds
10%
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Risks to Energy Infrastructure
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• Abqaiq lesson: deep understanding of
regional energy infrastructure
• Objective:
> Maximise disruption to global energy markets
> Punish countries hosting the US
> Demonstrate dominance of the Persian Gulf
• Tactics:
> Combination of guided and unguided
ordnance
> Blind the radars, intensify fire
• Targets:
> Military and dual use
> Energy: Refineries, processing plants,
storage, terminals
> Desalination, civilian aviation, civilian ports
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Houthi UAV Range: Most of Saudi Arabia and the UAE
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Disruption to Shipping in the Gulf
9
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War Scenario: Commercial Impacts for the GCC
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Supply
shortages for
manufacturing
(shipping delays)
Electricity and
water shortages
(desalination
strikes)
Staff evacuation
demands in GCC
Airport and
roads
congestion
Airport closures
and disruption:
Abu Dhabi,
Manama,
Dammam, Tel
Aviv
Staff shortages
Increased non-
payment risks in
GCC
Israel-Lebanon
Israel-Gaza
Iraq energy
infrastructure,
military and
diplomatic US +
coalition targets
Greater role for
non-US firms
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Competition in the Eastern MedJack Kennedy - Senior Analyst, Middle East & North Africa
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Eastern Mediterranean Competition
12
Turkish expansionism is the new norm
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Territorial Control in Libya - February 2020
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Support for GNA Support for LNA
?
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Risks to Maritime Assets
14
Two Turkish frigates
deployed off the coast of
Tripoli on 29 January 2020
Tripoli Port
Sirte Port
Benghazi Port
Derna Port
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Risks to Aviation Assets
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Hangar destroyed by LNA airstrikes, Mitiga airport
Oct 2019
Libyan Arab Air Cargo destroyed by LNA airstrikes,
Mitiga airport. Jul 2019
Hangar destroyed by LNA airstrikes, Misrata airport
Sep 2019
LNA airstrikes on Zuwarah airport
Aug 2019
GNA Bayraktar-TB2 shot down
shortly after take-off by LNA at
Mitiga Airport
22 Jan 2020
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Eastern Mediterranean as Crowded Space
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Key Risks • Elevated risk of cargo disruption crossing any disputed maritime area
• Further deployment of naval vessels from France, Italy, Israel likely
• Turkish gunboat diplomacy in disputed EEZs increases likelihood of confrontation
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Civil Unrest in Latin AmericaJohanna Marris - Research Analyst, Latin America
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Unprecedented levels of social unrest in Latin America have
caused severe ground and maritime cargo delays
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• Violent protests in countries including Chile, Ecuador,
Colombia and Bolivia in second half of 2019, to
unprecedented levels.
• Contributing factors: economic (costs of living, access to
public services) and political (demands for stronger
democratic institutions).
• Greater willingness by demonstrators to prolong protests
to demand concessions from the government.
• For Chile, commercial losses estimated at around
USD3bn. In Bolivia USD2bn, Ecuador USD1.6bn,
Colombia USD400 million.
• Impact on cargo: road blockades, arson attacks on
vehicles, port strikes and border closures.
Riot police fire tear gas during anti-and pro-government protests in Santa Cruz, 28 Oct 2019.
Getty images.
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Chile: More port and mining strikes, highway blockades
likely in 2020
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• October 2019: Protests triggered by metro fare increase.
• 1,100+ violent incidents reported in first week
• Oct-Nov 2019: Maritime cargo export value fell 17% (by
USD2bn) and volumes by 23%. Blockades on major routes.
• In 2020: Spikes in protests likely
Main cargo risks in 2020:
> Frequent disruption in central Santiago from burning
barricades
> Protests by No+TAG movement, arson attacks on toll
booths on main highways
> Further port strikes, greatest impact on Valparaíso and
San Antonio
> Striking mining workers blocking access to/from mining
sites during 34 scheduled collective negotiations
> Cargo associations or workers joining national strikes
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Bolivia: Border closures and highway blockades likely in
May-July 2020
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• Political crisis in Oct-Nov 2019: international
border closures, highway roadblocks, all
access blocked to capital La Paz
• New elections scheduled for 3 May 2020
• Ground cargo disruption highly likely May-July
2020.
• Disruption more likely to escalate to 2019
levels if:
> Current interim President Jeanine Añez wins
the election
> Former president Evo Morales wins a seat
in the Senate or returns to Bolivia from
Argentina
> Any evidence emerges of electoral
irregularities
• Hotspots 2020: La Paz, Cochabamba, Santa
Cruz, and border crossings to Chile and Peru
As of 19 November 2019, there were a total of 71 blockades on national highways.
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Mexico: Social unrest in southern states to involve rail and
road blockades in 2020
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• President López Obrador’s support of indigenous and rural
concerns is incentivising disruptive protests:
> Rail blockades Michoacán 2019: 62 days total,
USD4.3mn in daily losses
> Road blockades Oaxaca 2019: 222 blockades on main
highways
• In 2020, protest triggers involving likely road/rail blockades:
> Construction of Maya Train and Trans-isthmic railways
> Delayed federal government payments to public sector
workers
> Increase in civilian casualties in shooting incidents by
criminal groups
• Disruption greater in Oaxaca, Chiapas, Veracruz, Tabasco,
Michoacán states
• Most affected sectors: Oil, mining, metals, agriculture,
automotive
Demonstrators protest against the Maya Train project of the government of
Andres Manuel Lopez Obrador in Mexico City on January 25, 2019. Getty
images.
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Potential triggers of renewed violent protests and cargo
disruption in 2020
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Country Trigger in 2020 Nature of likely protest
Argentina Increase in export taxes Roadblocks in Buenos Aires, Santa Fe, Cordova and La
Pampa provinces, impacting Rosario port
Argentina Deeper government spending cuts in
second half of 2020
Truckers strikes and protests
Brazil Significant increase in fuel prices National strikes by truckers’ associations, lasting up to 2
weeks
Brazil Supreme Court reversing cargo tariffs
introduced by previous government
National strikes by truckers’ associations, lasting up to 2
weeks
Colombia Breakdown of negotiations between
government and civil/labour organisations
Renewed national protests, affecting main inter-city
transport routes and blocking access to Buenaventura port
Costa Rica Public salary cuts, dismissals or new
taxes
Cargo drivers joining public worker strikes, disrupting cargo
on Route 32 to Limón port
Peru Complaints over water pollution at mining
and oil projects
Violent protests and road blockades in Loreto, Apurimac,
Cusco, Arequipa, Puno and Moquegua, and disrupt cargo
to Matarani port
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Piracy in the Gulf of GuineaMartin Roberts - Principal Analyst, Sub-Saharan Africa
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Gulf of Guinea Piracy Incidents: Jan 2019 - Feb 2020
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Piracy Outlook
• Use of motherships responsible for surge in Gulf of Guinea kidnapping in
December 2019 – nearly as many victims as the rest of the year totalled
• Concerted action against motherships unlikely, with return of rainy season the
most likely deterrent
• Serious efforts to tackle Niger Delta-based pirate gangs depend on Nigerian
government, which is unlikely to act because of multiple vested interests
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• Focus will remain firmly on the
lucrative practice of kidnap for
ransom
• The anchorages of Nigeria’s
neighbours remain at risk, but pirates
have opened a new front along the
borders of its EEZ, exploiting
haphazard patrolling and unclear
jurisdictions
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Impact of Novel CoronavirusKeerti Rajan - Director, Head of Asia-Pacific
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Novel Coronavirus Impact
• China is a much larger part of the world economy today than in 2002-03 (SARS outbreak).
– 16% of global GDP
– Largest commodity consumer
– Outward tourism has soared with GDP/ capita
• GLM ‘severe’ scenario:
– Confinement measures in place to end-Feb; 5-week rather than seasonal 10-day shutdown.
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29
Novel Coronavirus Impact
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• Force majeure
> Chinese law more relaxed than western law.
> Total, Shell in dispute over LNG.
> Reuters: “At least 97 Chinese enterprises had
received force majeure certificates from the council
as of Monday. The industries cut across a wide
spectrum, including steel, apparel, paper products
and construction materials.”
> SOEs likely to run losses, given policy bank
support and government guarantees.
• Cargo
> No cargo scores changed.
> No marine/ air war or strikes
> Perishables?
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Insurable Perils
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• Known unknowns
> Incubation period
> Infective period
> Reproductive rate
• No therapeutics confirmed
• Peak?
> New case rate not stable.
> Cases likely under-reported
> Fatality rate to decrease?
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Outlook
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Questions?
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Contact
Columb Strack
Principal Analyst - Middle East & North Africa
IHS Markit Country Risk