Attacks by Yemen's Houthi armed forces on cargo ships have affected the stability of the Red Sea route and container shipping rates. The security risks of this route have spread to other routes, leading to a chain reaction, disrupting global transportation. With the US and the West attacking Houthi targets and deploying additional naval and air forces around the Red Sea, the Houthi forces are also adjusting their strategy, causing the Red Sea crisis to unfold. in a more long-term direction.
Shipping costs skyrocketed
The Suez-Red Sea Canal is an important shipping route connecting Asia and Europe, with nearly 14% of the world's seaborne trade passing through. In 2023, 22% of the world's containers, 20% of car carriers, 15% of product ships and 5% of dry cargo ships passed through the canal. Since Houthi forces attacked cargo ships passing through the Bab el-Mandeb Strait, the majority of shipping companies have chosen to avoid the Suez Canal – Red Sea route.
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| Houhti attacks on cargo ships in the Red Sea have disrupted one of the world's most important trade routes. Illustration |
By the end of January 1, there had been more than 2024 attacks on shipping vessels in the Red Sea, mainly container ships. Global shipping giants such as Maersk, Hapag-Lloyd, Robinson Global, Hanxin Shipping, Hualun Wilson, Yang Ming Shipping and Evergreen Shipping have all announced to stop accepting freight in the Red Sea region and Dong Nai. increased the number of ships sailing around the Cape of Good Hope in Africa.
More than 90% of global trade is by sea, and shipping congestion directly leads to imbalances in the global supply chain and causes a chain reaction. For the container shipping market, a detour around the Cape of Good Hope would add $1 million to $2 million in fuel costs per vessel, as well as the cost of time over 10 days, reducing the estimated arrival time. unpredictable and delayed port ship schedules. In the case of a large number of cargo ships making detours, it also aggravates port congestion, leading to an increase in transit containers, slowing down the return process of empty containers, which further causes problems. There is a shortage of containers.
Taking the mid-week standard of December 12, the number of container ships passing through the Red Sea region has decreased by more than 2023%. Estimated transit times from East Asia to Europe and from East Asia to the Mediterranean have increased by 70% and 26%, respectively, and transit times for grain and coal from the Black Sea to East Asia and from the East Coast of US to East Asia increased from 51% to 52% respectively.
According to Nikkei, about 47% of shipments of toys and 40% of household appliances and clothing on the East Asia-Europe route are being affected by rising freight rates and extended times. Regarding industrial raw materials, 24% of chemicals, 22% of automobile steel plates, 22% of insulated wires and batteries are affected, some raw materials are difficult to deliver, parts factories of large companies In some places, such as Tesla and Volvo in Belgium, they were forced to temporarily suspend production. According to Spain's Barcelona port, maritime traffic was delayed by 10-15 days.
In addition, due to the accumulation of shipping costs, insurance costs, time costs and safety risks, international shipping rates continue to increase. According to data from the Shanghai Shipping Exchange, since the Red Sea crisis, the Shanghai container export transport index has increased for 9 consecutive weeks, freight rates on the East Asia- Europe has increased more than 350% over the same period last year; East Asia-Mediterranean trade increased by more than 250% over the same period last year.
Inflation in the West
The impact of the Red Sea crisis on trade in key commodities such as oil, gas, and food is still relatively limited, but subsequent changes are of great concern. In the oil and gas sector, data from the US Energy Information Administration shows that the Red Sea route and the pipelines along it transport 12% of total ocean-borne oil trade and 8% of total gas trade. of the world's natural gas liquefaction in the first half of 2023, with about 7 million b/d passing through the Suez Canal to the Bab el-Mandeb Strait.
The West is concerned that the Houthi targeting of oil tankers will have an impact on oil shipments and cause inflation in the West. Even President Biden publicly explained the reason for his decision to launch a military attack against the Houthis, with inflation being the top consideration.
According to experts, the risk of insurance premiums from the Red Sea crisis for the oil market is lower than expected due to factors such as US oil exports continuing to increase and global demand slowing down. and the continued easing of US oil export bans on Iran.
In the food sector, overall global wheat supplies in 2024 are sufficient and the impact of the Red Sea crisis on food prices is currently relatively limited, but freight rates may increase due to the Long shipping times for wheat and increased transportation costs will exacerbate import pressure on food-insecure countries in regions such as East Africa, the Middle East, and Asia.
