Few areas are as militarized as the twenty miles of Bab el-Mandeb, the strait between the Gulf of Aden and the Red Sea. The Houthi rebels have already attacked over twenty passing merchant ships with missiles, drones and attacks from ship hulls and helicopters. The United States leads a coalition of 12 countries to defend the route. India and Pakistan have sent military ships to the region, as has Iran. Meanwhile, China, Saudi Arabia and Britain maintain military bases in Djibouti, which overlooks the strait, while Moscow maneuvers its very nearby Eritrea.
In these clashes and tensions, small and medium-sized Italian companies risk being among the losers. Until a few weeks ago, about 30% of global maritime trade and 40% of Italian trade passed through the Straits of Suez and Bab el-Mandeb across the Red Sea; especially the one that connects the country to the Gulf, to India, to China, Japan and Australia. Now the bottleneck at the exit of the Suez Canal is changing the situation due to Houthi attacks and threats from Iran. And not just imports, like on December 12, when militiamen set fire to the Strinda, a Norwegian chemical tanker carrying biofuels from Saudi Arabia to Italy.
Exports from Genoa, Trieste and Naples to Shanghai are also beginning to deteriorate rapidly. In the last week alone, the cost of transporting a container from the Mediterranean to China rose from 153 to 507 euros and the journey in the opposite direction rose slightly less. Prices are lower than after the post-pandemic reopening, but export contracts are even lower.
The Divulga study center, which collected this data from the global Freightos platform, explains the cost explosion with the decision of some large groups to stop sailing through the Red Sea. The Chinese Cosco no longer connects Israel. Large logistics companies such as MSC, owned by the Aponte family, or the Danish Maersk have stopped transit from the Red Sea and are deviating from the Cape of Good Hope route, which is about two weeks longer and a million dollars more each way for fuel alone requires. Anyone who continues to travel through Suez and Bab el-Mandeb does so with their transponder switched off in order not to be recognized and must bear insurance costs that have increased by at least three and a half times. According to Lloyd List, traffic has fallen from 400 to around 250 ships per day.
The typical “Made in Italy” producers suffer the most. Marco Forgione, director general of the Institute of Export and International Trade in London, says: “The impact of the Bab el-Mandeb crisis will fall disproportionately on small and medium-sized companies as they will not be able to absorb the new costs.” And that will be particularly relevant for Italy.” Exporters are currently squeezing the margins of contracts that have already been concluded. But given the next agreements with Asian customers, it will be crucial for “made in Italy” to understand how long the shortages will last. According to Forgione of the Institute for Export and International Trade, this will not just be the case for a short period of time: “We are witnessing the transformation of global trade routes into weapons to achieve political goals,” he says.
The West has promised to shoot down Houthi drones and guided-missile artillery, but that does not appear to be a sustainable tactic. Firstly, because – according to a Brussels official – after two years of deliveries to Ukraine, the delivery of European missiles to intercept Houthi attacks could not take longer than two weeks. The rebels launch drones that cost around $2,000 each, and each guided missile to neutralize them costs $2 million. The path to an American attack on the Houthi positions in Yemen also appears closed: The White House does not want to risk retaliation from Iran by blocking the passage of Gulf tankers through the Strait of Homuz, which would drive up oil prices and inflation American election year.
Tehran understands these fears perfectly: on December 23rd, General Reza Naqdi, commander of the Revolutionary Guards, invoked the “Nightmare of Hormuz” and the “closure of the Mediterranean including Gibraltar”. Perhaps his threat refers to possible acts of piracy, perhaps from countries where there is no shortage of Hamas sympathizers, such as Algeria. Certainly “Made in Italy” exporters are affected by the tensions in the Middle East. Otello Gregorini, general secretary of the National Artisans Confederation, says: “It is a pincer crisis. There are delivery delays of two weeks, which are expected to increase. The little ones without their own supply lines are most at risk.”