Tensions in the Red Sea have disrupted trade flows

January 2, 2024

2 mins read

One of the notable news stories of this week was the heightened risk and worries regarding attacks by the Yemeni Houthi rebels on merchant shipping in the Suez Canal region in Egypt. The canal is an important waterway and the shortest shipping route between Europe and Asia. As a result of this heightened risk, ocean carriers are imposing war-risk surcharges on shippers, adding additional costs to shipping invoices. According to market players, all lead times are being affected using the Red Sea route as many vessels are being rerouted around the Cape of Good Hope, which adds 10 days to the westbound journey of an Asia-North Europe shipping loop. The extended travel time could lead to delays in the delivery of goods, especially considering the already tight pre-Chinese New Year supply schedule. These delays, coupled with the increased demand for shipping alternatives, are likely to result in a spike in freight rates as the industry adjusts to the new operational challenges. A Mintec source added, “Currently, it's only logistics that seems to have a bigger impact as well as short shelf-life products than let's say grains and oilseeds.” Mintec heard that large carriers like Maersk and Hapag-Lloyd have suspended container ship traffic in the Red Sea due to these Houthi attacks. The restrictions do not yet apply to bulk carriers, although market players believe they could also be affected if tensions rise further.    

Topics: Grains & Feed

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