Houthi Attacks in Red Sea: Higher Shipment Cost Due to Rerouting of Vessels
Houthi militants’ attacks on ships in the Red Sea, which is claimed to be revenge against Israel for its military campaign in Gaza, are threatening global trade.
Global supply chains could face severe disruption as a result of the world’s biggest shipping companies diverting journeys away from the Red Sea. Four of the world’s five major shipping firms – Maersk, Hapag-Lloyd, CMA CGM Group and Evergreen – have announced they would pause shipping through the Red Sea amid fears of Houthi attacks.
The Red Sea runs from the Bab-el-Mandeb straits off the coast of Yemen to the Suez Canal in northern Egypt, through which 12% of global trade flows, including 30% of global container traffic. Shipping vessels taking this lane are forced to reroute around the south of Africa (through Cape of Good Hope), resulting in a much longer route with significantly increased shipment time and costs, including energy costs, insurance costs, etc.
Delays to products reaching shops can be expected, with container ship journeys expected to take at least 10 days longer due to the Cape of Good Hope route adding about 3,500 nautical miles.
The extra distance will also cost companies more. Shipping rates have risen 4% in the past week alone, the volume of cast iron pipe exportation will be decreased.
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Post time: Dec-21-2023