Houthi attacks on ships disrupt global trade
Houthi rebels on the Arabian Peninsula have been targeting cargo ships in the Red Sea, leading to significant disruptions in global trade. Following Israel’s military operation in the Gaza Strip in October 2023, these attacks have escalated. According to US President Joe Biden, there have been 27 attacks on ships so far. As a result, several shipping companies have suspended maritime traffic through the Red Sea and have redirected their vessels to take longer routes around the southern tip of Africa.
The Red Sea serves as a vital trade route, connecting the Indian Ocean to the Mediterranean through the Suez Canal. It facilitates approximately 12% of global trade. However, the volume of freight transported through this crucial route has drastically decreased due to the Houthi attacks. In December 2023, the Kiel Institute for the World Economy (IfW) reported that the volume of containers transported in the Red Sea had plummeted by over half and was currently nearly 70% below normal levels.
The rerouting of ships around the Cape of Good Hope has significantly extended the transportation time for goods between Asian production centers and European consumers. Julian Hinz, director of the IfW’s trade policy research center, explained that this extension could reach up to 20 days. The delay in unloading goods at ports has resulted in declining trade figures for Germany and the European Union.
The impact of these disruptions is being felt across various industries. Tesla, the electric car manufacturer, recently announced a two-week pause in production at its Grünheide plant in Germany due to a lack of components. The German Shipowners’ Association (VDR) highlighted that extended delivery times, increased emissions, and higher costs for shipping companies are among the immediate consequences of the situation. The exact cost implications vary based on ship-specific factors, including size, load, speed, fuel type, and crewing.
Hapag-Lloyd, ranked fifth globally among shipping companies, estimates that ship journeys on the route from the Far East to the United States’ east coast will be extended by seven days, and up to 12 days for destinations in Northern Europe. These additional days at sea translate into high tens of millions of euros in added monthly costs. Maersk, the world’s largest shipping company, highlighted that each passage will become approximately 50% more expensive due to the extra travel distance in both directions.
While industry participants have learned from past disruptions, such as the closure of the Suez Canal and the COVID-19 pandemic, the situation may worsen, especially during the upcoming Chinese New Year celebrations. With China’s factories closing for two to four weeks from February 10, many customers are attempting to place orders in advance. However, the rerouting of ships around South Africa may lead to delays in returning to the People’s Republic on time. There are already reports of container shortages in the port of Ningbo.
In response to the attacks, Maersk has temporarily suspended traffic through the Red Sea, emphasizing the need to resolve the issue quickly. Maersk CEO Vincent Clerk urged the international community to mobilize and take action to reopen the Bab-el-Mandeb strait, a critical passage for global trade. The German shipping company Hapag-Lloyd also advocates for military involvement in securing the route, expressing the urgency for German participation and regional support by the German navy to protect merchant shipping.
German Foreign Minister Annalena Baerbock expressed support for the recent military strikes against Houthi positions in Yemen led by the United States, the UK, and other allies. She emphasized the right to self-defense under the United Nations Charter. The German government is currently working within the European framework to determine its participation in securing shipping in the Red Sea.
Amid the ongoing disruptions, German retailers do not anticipate immediate shortages on store shelves due to more robust supply chain management. However, the situation could deteriorate in the coming weeks, warranting continued attention to stabilization efforts in the Red Sea.
In conclusion, Houthi attacks on ships in the Red Sea have created significant disruptions to global trade. With maritime traffic being redirected and extended delivery times, industries worldwide are grappling with increased costs and uncertain supply chains. As industry leaders call for international support to secure the critical trade route, the global community must act swiftly to alleviate the strain on the global economy.
