Attacks by Houthi rebels on commercial and military ships in the Red Sea will still have limited economic consequences unless the crisis continues, experts say…
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Maritime transport under tension
Attacks on transport ships between Africa and Yemen have become increasingly frequent in recent weeks. About 12% of global maritime trade normally passes through the Bab al-Mandeb Strait, which controls access to the southern Red Sea, but since mid-November the number of containers has fallen by 70%, maritime experts say.
Many shipowners preferred to suspend their traffic in this area and instead choose an alternative route around South Africa's Cape of Good Hope, which is longer and more expensive.
Adding to the difficulties is the fact that another region of the world is affected, this time by climate risks. The drought in the Panama Canal has significantly slowed shipping traffic between Asia and the United States. While around forty container ships normally pass through daily, this number was reduced to 24 daily passages in mid-January.
Delays and standstills
Several companies have already announced delays, such as the Swedish furniture giant Ikea. “The situation in the Suez Canal will cause delays,” the company said in an email to AFP.
Automobile production is also disrupted. Tesla therefore announced that production at its European factory would be suspended for two weeks between January 29th and February 11th. The Volvo factory in Ghent (Belgium) was also scheduled to be closed for three days in mid-January due to a lack of gearboxes, the delivery of which was delayed due to “readjustments to sea routes”.
“Capital goods or electronics companies could experience delays. For those operating just-in-time with very low inventory, this can prove problematic,” Ano Kuhanathan, economics expert at Allianz Trade, confirms to AFP.
In Spain, the Association of Manufacturing and Distribution Companies (Aecoc) announced that several sectors had placed advance orders for certain raw materials and goods, such as furniture or textiles, for which they were experiencing delivery difficulties.
Ultimately, the transport of liquefied natural gas (LNG) will be “affected” by the escalation in the Red Sea, Qatar Prime Minister Mohammed bin Abdulrahmane Al-Thani said on Tuesday during the World Economic Forum in Davos.
What impact on prices?
Shipping companies have made significant price increases to cover the costs associated with the crisis. One of the benchmark indicators measuring the freight costs of goods transported from China, the Shanghai Contained Freight Index (SCFI), has more than doubled in a month.
According to the logistics platform Container xChange, the additional fuel costs amount to around 20%. It estimates that the Red Sea crisis could increase the cost of sea transport by 60%, with an additional premium of around 20% for shipowners' insurance.
This raises the specter of renewed inflation. These fears were estimated by the international firm Oxford Economics at an additional 0.7 points of global inflation by the end of 2024 in the event that “the Red Sea was closed to boats for several months and transport costs remained about twice as high as in December .”
So everything will depend on the duration of the crisis. “A circumnavigation of Africa and not the journey through the Suez Canal is more expensive and takes longer. But at the moment it is more of a security problem than a logistical problem,” said Siegfried Russwurm, president of the BDI, on Tuesday.
The day before, EU Economic Affairs Commissioner Paolo Gentiloni warned: “What is happening in the Red Sea does not seem to have any impact on energy prices and inflation at the moment.” But we believe we need to watch this very closely as these consequences are in the future could occur in the coming weeks.”
“We have to remember that traffic is not completely disrupted,” comments Ano Kuhanathan from Allianz Trade. But “the risk of inflation can be significant.”