Red Sea attacks cause global supply chaos, firms use alternative routes

Yemen's Houthi rebels continue to target commercial vessels in the Red Sea - using missiles, drones, and helicopters. They claim the ships they are attacking are linked to Israel. The route is crucial for global supply chains, raising fears that costs for certain goods could skyrocket.

‌While it may be a long way from Paris, Berlin, and Rome, Nils Haupt, head of corporate communications for Hamburg-based shipping company Hapag-Lloyd, told CGTN that what happens in the Red Sea has a crucial knock-on impact on the delivery of goods globally.

‌"The Red Sea is extremely crucial for shipping as it connects the Far East with North Europe and also with the East coast of the United States. Also, with the East Mediterranean," he said. "It shortens the travel time, too. When we talk about the East Med, that's by about three weeks, to the U.S. East Coast, one week, and to northern Europe, 10 to 14 days."

‌One of Hapag Lloyd's ships was attacked by Houthi militants on December 18. Haupt explained to CGTN that this came as a huge shock to the Shipping giant.

‌"Luckily, nobody was hurt, but some containers fell into the sea, and some containers were damaged," he explained. "We had a fire on board, which was extinguished. But of course, that makes you think of, you know, that peaceful merchant shipping is suddenly affected by terrorist attacks.

"We don't have any experience with that in the recent history of container shipping. And of course, you have to take care of your crews, also of the vessels and the cargo of our customers. But I mean, we have 23 people on board, and we need to take care of them."

Hapag Lloyd, CMA CGM and Maersk have all ceased sailing through the Red Sea and the Suez Canal, opting for the far longer Cape of Good Hope route - to reach the west.‌ This adds up to two weeks to some journey times and considerable extra costs of around $1.25 million per sailing, depending on the destination. All of which is expected to be passed on to the end consumer.

‌One-third of the world's container traffic usually goes through the Red Sea and the Suez Canal. This includes 12 percent of global oil tankers and 8 percent of the world's Liquified Natural Gas.

‌It is also the main route for palm oil to get into Europe, which is used in all kinds of things, from chocolate to ready meals. We may well see increases in the price of these products because, as Haupt told CGTN, the cost of the journey bringing goods into Europe has gone up significantly.

"To the eastern Mediterranean, normally it's ten days through the canal, now it is 18 days longer. So that means additional fuel costs and if you add this up, you know, depending on the ship type, it's a high two-digit amount of tonnes per day," according to Haupt estimating an increase of at least $10 million in costs last month alone.

An overlooked consequence of the conflict in the Middle East is that because shipping is now having to take longer routes, which take longer, many of the world's containers are not where they are supposed to be. 

CGTN spoke by phone with Melissa Xie, the business manager from StarMeta Technology in Shenzhen. She says Chinese Shipping companies with orders from the West are taking things in their stride now but expect the knock-on effects to last for a long time.

‌"For now, there is no obvious and immediate impact since it is before Chinese New Year, and most of what we receive are emergency orders. However, I would estimate the huge impact might be reflected in the early 2025, spring and summer."

‌Back in Europe, Germany has joined a group of 12 nations warning of military consequences for the Houthis if they continue to attack shipping vessels. 

The real risk in Berlin and other European capitals is that the inevitable rise in consumer costs could throw economies - that are already struggling - back into the mire of rising inflation.

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