Red Sea attacks: Shipping delays & rising costs warning

Since November vessels in the Red Sea have been targeted by Yemen Houthis, forcing shipping companies to detour around Africa’s Cape of Good Hope instead of using the Suez Canal, incurring longer journeys and higher costs.

Shipping containers on freighter ship
Photo by Rinson Chory on Unsplash

The Suez Canal handles approximately 12% of global trade and 30% of global containers, transporting over USD $1 trillion worth of goods per annum. Though the vulnerability of the world’s most important and busiest maritime trade routes has yet again been highlighted with the recent attacks on commercial vessels. Detouring the Suez adds 10-14 days and 3500 nautical miles to shipping routes.

According to the Leisure and Outdoor Furniture Association (LOFA), the situation in the Red Sea is unpredictable and adjustments may be made if security improves. As a result shipping companies are facing increasing costs to the detriment of the supply chain. LOFA states that “While the cost increase may not reach COVID levels, it is feared that this disruption could also drive-up oil prices, leading to higher fuel prices and inflation”.

LOFA have stated, “LOFA members will do their best to alleviate this situation, but they cannot sustain another massive hike in container costs. They may have no choice but to pass on these significant increases down the supply chain. Some companies are already facing resistance from customers regarding these surcharges, but it is important to understand that suppliers have limited control over pricing in rare Force Majeure events such as these.

To address the threat in the Red Sea, the US has launched an international naval operation, joined by nations like the UK, Canada, France, Bahrain, Norway, and Spain. However, some shipping companies remain wary of resuming operations immediately, concerned about container shortages and port congestion that could result from extended vessel rotations.

Regardless of the results of military intervention and a resumed Suez route, it seems likely that higher costs and delays will continue in the run up to and possibly well beyond Chinese New Year. The situation will not only impact the outdoor leisure industry but will affect all supply chains routing through the Suez Canal.”