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Attacks by Yemen's Houthi rebels on merchant ships in the Red Sea are causing prices for goods transported through the region to skyrocket. Yemeni rebels close to Iran are protesting against the Israeli offensive in Gaza and the situation is becoming critical for major international shipping companies
Published on April 1, 2024 08:31
Reading time: 2 minutes
Screenshot of footage released by Yemen's Houthi Ansarullah media center on November 19, 2023, showing rebel hijacking of a cargo ship. (- / ANSARULLAH MEDIA CENTER / VIA AFP)
Most maritime transportation companies refuse to use the Suez Canal, which connects the Red Sea and the Mediterranean. The Red Sea is considered a sea route and connects the Mediterranean with the Indian Ocean, i.e. directly from Asia to Europe, in both directions. And since October 19, Houthi rebels have carried out more than twenty attacks on international shipping in the region, which accounts for 12% of global maritime trade.
The ships are being diverted to the Cape of Good Hope off the coast of South Africa, extending the journey by a good week, which obviously leads to a significant increase in prices. The French CMA-CGM announces that its freight rates will almost double from January 15th. Specifically, the shipping company from Marseille will increase the transport of a 40-foot container (the equivalent of 67 m3) from 3,000 to 6,000 dollars (5,500 euros). The Italian-Swiss MSC has just increased its prices for trade between the Mediterranean and the Arabian Peninsula by 1,800 euros per container. As for the Danish Maersk, whose container ship was hit by a missile on Sunday December 31, it has simply decided to temporarily suspend its passage through the Red Sea.
Rising prices and disruptions in logistics
This poses a problem for the supply of all kinds of goods to Europe, with all the logistical consequences. Swedish furniture giant Ikea is anticipating possible delays in the delivery of certain products or even their absence from shelves.
In all cases, this situation contributes to the general context of inflation: logistical problems that complicate supply chains, increasing transport costs and therefore the production and sale of everyday products and consumer goods in our stores. This leads economists to consider a permanent continuation of inflation… in any case a slowdown in price growth that is much slower than expected.
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