If trade disruption is the Houthi’s main aim, then they will have been getting good results as the movement fires another missile, downed by the US military, but Qatar announces that its vessels will not transit Suez until it is safe. But this will not necessarily result in higher inflation.
Reuters reported yesterday that QatarEnergy had halted its gas tankers from taking the Suez route following the US and UK air strikes last week, and although the attack on USS Laboon has highlighted the risks to shipping and international trade on taking the shorter Suez route to Europe from Asia.
“It is a pause to get security advice, if passing (through the) Red Sea remains unsafe we will go via the Cape,” a source told Reuters. “It is not a halt of production.”
However, Dryad Global CEO Corey Ranslem following the coalition forces’ attack on Houthi installations there is an expectation that there will be a regional escalation of hostilities.
“Most shipping organisations are recommending that all vessels pause their operations within this region,” said Ranslem, “We are expecting a Houthi response to this action by the US and UK. The Houthis are very unpredictable so we could see this spread further South into the Gulf of Aden as well.”
As a result of the Houthi attacks, the number of vessels transiting the Bab al-Mandeb, linking the Red Sea and Suez to the north and the Gulf of Aden and the Indian Ocean to the south, has collapsed in the two weeks of this year alone.
The Kiel Institute for the World Economy’s Kiel Trade Indicator shows that container vessels transiting Suez had declined by over 50% in December, from expected volumes calculated from volumes in 2017-19, January volumes went to new lows of minus 70% of the expected throughput, totalling 200,000 TEUs.
Julian Hinz, director of the Trade Policy Research Center and new head of the Kiel Trade Indicator, said, “Despite a noticeable increase in transportation costs, no noticeable consequences for consumer prices in Europe are to be expected, especially as the proportion of freight costs in the value of goods for high-priced items, such as consumer electronics, is only in the per mille range.”
He went on to say, “Apart from slightly longer delivery times for products from the Far East and increased freight costs, to which the container ship network should quickly adjust, no negative consequences for global trade are to be expected.”
To a large extent, the Global Shippers’ Forum (GSF) agrees with Hinz, with the director James Hookham pointing out that carriers should be able to adjust schedules after a month to take into account the longer distances.
With costs increasing there will be higher rates, but that should not be excessive, about US$1,000 a box, according to Xenata chief analyst, Peter Sand.
“There is a concern that a war is being fought through the medium of merchant shipping,” claimed Hookham. And one of the ways this may play out is through rising costs, particularly in the Mediterranean.
Mediterranean destinations were served either by direct lines operating between the Mediterranean and Asia, or with North European services calling at various ports in Egypt, Greece, Italy, Spain and France, following their exit from Suez.
By transiting the Cape vessels will call at ports near the Gibraltar Straits, such as Tangier and Algeciras, transhipping cargo to Mediterranean destinations, increasing not only the time at sea, but also the number of container lifts required.
“Shippers should prepare for extra costs,” said Hookham, adding that “While the Red Sea disruption is not on the scale of the pandemic or the Ever Given accident, it assumes that there is no widening of the disruption.”
Mary Ann Evans
Correspondent at Large
