Houthis’ attacks in the Red Sea are hiking shipping fees

Red Sea Shipping Houthis

Since Israel shows any intention to stop the so called genocide in the Gaza Strip and the International community doesn’t seem to have any power to stop it, Iran and its militant groups are taking concrete actions to pressure the Zionist country and lead it to a permanent ceasefire.

The cost of shipping goods through the Red Sea and this continuing disruption is leading to higher inflation globally, industry analysts have said, reported The National on January 9th.

“These include Europe-based MSC, Maersk, CMA CGM and Hapag-Lloyd, and Asia-based Cosco Shipping, HMM and Evergreen Line, as well as oil and gas tanker operators”, reported The National.

The alternative route is around the Cape of Good Hope at the southern tip of Africa, which increases the travel time between Europe and Asia and, as a consequence, increases the costs.

Some of the companies have imposed surcharges to cover these additional expenses.

However, the rise of the costs are not only due to the Houthi attacks in the Red Sea.

Rahul Sharan, senior manager for bulk research at Drewry, says that China is also worried to about insufficient shipping capacity to transport products before the Chinese New Year holiday. That’s why it has increased the costs as well.

“Logistically, this becomes a difficult situation”, Christian Roeloffs, co-founder and chief executive of Hamburg-based Container xChange, told The National.

“The cost of war risk insurance has doubled in the past week and we do expect this to further go up,” he said.

The National reported that “container rates on the Asia-Europe trade have been affected the most”, said Rico Luman, senior economist of transport, logistics and automotive at Amsterdam-based ING Research.

“Particularly sailings to Mediterranean ports are significantly longer. Port-to-port container rates on the Asia-Europe trade was up 130 per cent compared to early November.”

The attacks have also increased the risks for the ships.

The Houthi attacks are goal is to pressure Israel to stop bombing Gaza and allow humanitarian aid to enter in the besieged region.

A senior US official said last week that 25 Houthi attacks had been carried out since November 18 on merchant vessels transiting the southern Red Sea and Gulf of Aden.

The US started the Operation Prosperity Guardian to fight the “reckless Houthi attacks” and guarantee again the international commerce across the Red Sea.

The National reported Pat Thaker, editorial director for the Middle East and Africa at the Economist Intelligence Unit declaration: “If left unchecked, the deteriorating security situation has major implications for global supply chains, including delayed shipments, increased transit times, and higher costs on energy and non-energy trade between Europe, the Middle East and Asia.”

Ali Abouda, chief financial officer of Dubai Financial Market-listed Gulf Navigation, expressed an important concern and affirmed that this situation will have huge repercussions for international commerce.

“The Bab El Mandeb is a key route for maritime trade, especially for oil shipments from the Middle East to Europe and the US,” declared Abouda.

He added also that it can create geopolitical tensions in the region and that the alternative route increases the risks for the ships.

READ: Iran’s leader calls for oil embargo against Israel

“Crossing the Red Sea is rare but when the vessels do cross the area, the company will put all necessary measures in place and assess the situation beforehand”, he said.

According to The National, the Red Sea is one of the world’s major commercial passages. It is estimated that 9 million barrels a day of oil shipments ( 10 % of global demand). The route covers almost one-third of global container traffic and around 12 per cent of global goods trade.

On the energy front, continued attacks by the Houthis have escalated concerns about supply disruption in the oil market.

Bab Al Mandeb, on the southern edge of the Red Sea, is a route for oil tankers and cargo ships sailing between the Arabian Gulf and Asia, as well as to Europe through the Suez Canal.

“At a regional level, a prolonged Houthi campaign against shipping in the Red Sea would severely risk the sustainability of oil and gas exports from major regional producers, such as Iraq, Libya and Algeria, which have more limited recourse to increasing pipeline exports compared with Saudi Arabia and the UAE, constraining revenue gains in the short term during a period of elevated hydrocarbons prices”, reported The National.

About 1,500 ships passed through the Red Sea every month last year.

The same media reports also that the global economy is going to face the worst impact right but “it drags yet again on trade conditions, so it’s a reminder for shippers to build resilience and work on contingency plans”, Luman said.

Also Europe is going to be affected by the Houthi attacks in the Red Sea. Europe’s car industry could experience “far-reaching”, Fitch analysts said.

Total vehicle sales in the continent are expected to cool down in 2024, reported The National.

“If the Red Sea were to remain closed to shipping for several months and shipping freight costs stayed around twice the level of mid-December, this could add 0.7 percentage points to global CPI [consumer price index] inflation by the end of 2024,” reported The National.

The National

Leave a Reply

Your email address will not be published. Required fields are marked *

Subscribe To Our Newsletter

[mc4wp_form id="206"]