WASHINGTON. Recent attacks by Houthi rebels in Yemen on ships in the Red Sea are sending shockwaves through global trade, causing disruptions in various industries. Car factories in Belgium and Germany have come to a standstill, and the launch of spring fashion lines at a popular British department store is facing delays. A Maryland-based company producing hospital supplies is grappling with uncertainty over parts from Asia.
The Houthi attacks, aimed at halting Israel’s offensive against Hamas in Gaza, have targeted cargo ships navigating the waters connecting Asia with Europe and the United States. This has forced a diversion of traffic away from the Suez Canal, compelling ships to take longer routes around the tip of Africa. The resulting chaos is leading to delays and increased costs, exacerbating existing challenges posed by pandemic-related port logjams and Russia’s invasion of Ukraine.
Ryan Petersen, CEO of Flexport, a supply chain management company, characterized the current situation as “short-term chaos” that is driving up costs. He highlighted the intricate planning required for each container journey affected by ship rerouting.
The disruption in global shipping is compounded by a “double whammy,” according to Petersen. The Panama Canal, another crucial trade corridor, is experiencing restrictions due to low water levels caused by drought. Additionally, there’s a rush among shippers to move goods before Chinese factories shut down for the Lunar New Year holiday from Feb. 10-17.
The longer the conflict in Gaza persists, the greater the threat to global trade. Petersen warned that a year-long disruption to Red Sea trade could result in a surge in goods inflation by up to 2%, adding pressure at a time when the world is grappling with a resurgence of inflation affecting various sectors.
Man & Machine, a company in Maryland, exemplifies the challenges faced by businesses. Clifton Broumand, the company’s founder and CEO, described the setbacks caused by the Houthi attacks, leading to delays in receiving shipments from Taiwan and greater China. The usual route via the Suez Canal has been shut down, and attempts to reroute through the Panama Canal have been hampered by drought-related issues. The uncertainty has left the company unsure of when their products will arrive.
Similar challenges are being experienced by other industries. Production at a Suzuki Motor Corp. plant in Hungary halted for a week due to delays in receiving engines and parts from Japan. British retail chain Marks & Spencer warned of delays in new spring clothing and home goods collections, originally scheduled for February and March.
Approximately 20% of clothes and shoes imported into the U.S. and a significant portion for Europe traverse the Red Sea, making this disruption a global crisis for the maritime shipping industry, according to Steve Lamar, CEO of the American Apparel & Footwear Association.
As of Jan. 19, Flexport reported that almost 25% of global shipping capacity is being or will be diverted from the Red Sea, adding considerable mileage and time to trips. The cost of shipping containers from Asia to Europe has surged, reaching nearly $5,500 for northern Europe and almost $6,800 for the Mediterranean.
While disruptions are evident, some companies claim they have yet to experience a meaningful impact. Retailer Target expressed confidence in its ability to supply products, and automaker Stellantis’ CEO, Carlos Tavares, reported that things are moving well so far.
However, the longer-term consequences remain uncertain. Petersen warned that avoiding the Suez Canal for a year would have significant ramifications, potentially leading to goods inflation of 1 to 2%. U.N. shipping expert Jan Hoffmann raised concerns about the impact on global food security, slowing the distribution of grain to parts of Africa and Asia that rely on wheat from Europe and the Black Sea area.
The situation could worsen if the Middle East conflict expands, potentially driving up oil prices. For now, companies are navigating through the challenges, but the resilience of global trade faces an ongoing test.
Si Venus L Peñaflor ay naging editor-in-chief ng Newsworld, isang lokal na pahayagan ng Laguna. Publisher din siya ng Daystar Gazette at Tutubi News Magazine. Siya ay isa ring pintor at doll face designer ng Ninay Dolls, ang unang Manikang Pilipino. Kasali siya sa DesignCrowd sa rank na #305 sa 640,000 graphic designers sa buong daigdig. Kasama din siya sa unang Local TV Broadcast sa Laguna na Beyond Manila. Aktibong kasapi siya ng San Pablo Jaycees Senate bilang isang JCI Senator.
