Introduction:
Global shipping companies, including Danish company AP Møller-Maersk and German company Hapag-Lloyd, are facing disruptions and rerouting of operations in the Red Sea due to attack risks from the Yemeni Houthi rebel group, prompting some companies to warn of product shortages and shipment delays while seeking alternative trade routes.
Affected Companies:
Swedish furniture company Ikea warns of a potential shortage of some products and expects delays in shipments due to Houthi attacks. The company states it is “in close dialogue with our transport partners to ensure the safety of workers in Ikea’s value chain,” according to multiple statements from the company to the press.
Impact of Attacks on Danone:
A spokesperson for Danone Group tells Reuters that transit times have increased due to rerouting most of its shipments, and if attacks continue for more than two to three months, the company will explore alternative sea or land routes, although Danone stated in a joint statement with Forbes magazine that there is “no significant short-term impact” on its operations so far and that it is “monitoring the situation” with its suppliers and partners.
Impact of Attacks on Electrolux:
Electrolux, one of the largest home appliance companies in the world, told Reuters on Monday that it expects there to be delivery constraints while searching for alternative routes and prioritizing certain deliveries.
Impact of Attacks on Abercrombie & Fitch:
According to Bloomberg, clothing retailer Abercrombie & Fitch informed suppliers on Wednesday that it is considering using air freight – which costs more than shipping by sea – to avoid disruptions.
Impact of Attacks on Global Shipping Prices:
Global shipping prices have also increased due to the attacks in the Red Sea. According to Reuters, the price to ship a container from China to the Mediterranean reached $2,413 on Tuesday – part of a 44% rise over December due to disruptions.
Background:
Since the onset of the current fighting between Israel and Hamas more than two months ago, the Houthi group – a Shiite rebel group supported by Iran in Yemen and allied with Hamas – has launched attacks in the Red Sea against U.S. Navy ships, cargo vessels, and oil tankers. Many commercial ships transit the Red Sea and the Suez Canal from Asia to markets in Europe and beyond. Defense Secretary Lloyd Austin stated on Tuesday that the U.S. is leading a multinational naval force to protect and support trade operations in the Red Sea. On December 15, Danish company Maersk instructed its ships to halt trips through the Bab el-Mandeb strait that connects the Red Sea to the Indian Ocean following a “near miss” incident with the Houthis involving its ship, Gibraltar. On December 18, major oil company BP suspended all shipments of oil, liquids, natural gas, and other energy materials through the Red Sea.
The Big Number:
$80 billion. This is the value of goods rerouted away from transiting through the Red Sea as of Tuesday, according to a CNBC report.
Looking Ahead:
Houthi attacks in the Red Sea have caused negative impacts on global shipping companies and shipping prices. This effect is expected to continue until the situation is brought under control and safety is restored in the region.
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