The impact has exceeded the early days of COVID-19! The Red Sea crisis spreads

Since the outbreak of a new round of Israeli-Palestinian conflict, Houthi armed forces in Yemen have repeatedly attacked and seized commercial ships in the Red Sea waters. A number of shipping companies have announced the suspension of Red Sea routes, and are instead sailing around the Cape of Good Hope, the southern tip of Africa.

The increase in shipping times and costs has led to a significant reduction in available capacity in the shipping market, according to Danish consultancy Marine Intelligence. The company warned that the damage to global supply chains was greater than in the early days of the global pandemic.
A weekly index of Red Sea shipping capacity fell 57% from its annual average in December, according to a new report from the Danish consulting firm Maritime Intelligence, more than the 47% drop in March 2020 at the start of the pandemic.

It was the second-biggest drop on record, company officials said. Only March 2021 exceeded that decline, at 87 per cent. That was when the heavy cargo ship Long Grant ran aground for six days in the New Channel of the Suez Canal, causing the worst blockage in its more than 150-year history and halting billions of dollars in trade.

The frequent attacks on merchant ships in the Red Sea have had a severe impact on global supply chains beyond the initial impact of the coronavirus pandemic, the report said.
It is understood that as of the beginning of January 2024, the global container ship capacity increased by 8% year on year, and the hand-held order scale accounted for 24.71% of the existing fleet size.

The Red Sea has always been an important shipping lane connecting Asia, Europe and Africa. Shipping companies’ rerouts have led to higher rates and weekslong delays for ocean shipping, disrupting the global logistics supply chain and affecting multiple industries.
About 47 percent of toys and 40 percent of household appliances and clothing shipped on routes connecting Europe and the United States with Asia could be affected by higher freight rates and delayed arrivals, the Nikkei reported.

In terms of industrial raw materials, 24 percent of chemicals, 22 percent of steel plates used in vehicles, and 22 percent of insulated wires and batteries will be affected, and some raw materials will even be difficult to deliver.

Electric-car maker Tesla, carmaker Volvo and others recently said they had been forced to suspend production at some of their factories.

In addition, the Red Sea crisis hit European food imports and exports, including exports of European dairy products, meat products, wine and other products, as well as imports of tropical fruits, coffee beans, tea, spices and poultry.
Maersk CEO Ke Wensheng warned in an interview with foreign media that if the Red Sea derouting problem is not solved, ships will soon be misplaced, which will threaten the global logistics supply chain.

The threat to Red Sea shipping is also a threat to global maritime trade. Delays and cost increases are piling up. While companies are exploring alternative transportation options, the adverse ripple effects continue to disrupt global logistics…