Salvatore Styles, founder of Aruba Wheels Up International, analyzes the impact of the Houthi rebel attacks on business domestically and internationally.
Global shipping rates are soaring as Yemen's Iran-backed Houthi rebels step up attacks on commercial shipping in the Red Sea, a vital waterway for Yemen. world trade.
New data from Freightos Terminals released on Friday shows that shipping rates for goods from Asia to Northern Europe have increased by 461% compared to mid-October, before the diversion of ships in the region began. Fares on routes from Asia to the North American East Coast and North American West Coast have also skyrocketed, rising by 130% and 97%, respectively, since the end of October.
The carrier also announced additional charges ranging from $500 up to $2,700 per container.
Approximately 15% of global shipping traffic, including 30% of global container trade, passes through the Suez Canal to and from the Red Sea. However, to avoid attacks and theft of cargo, many ships sail around the Cape of Good Hope, a circuitous route. Africa. Even after the US and UK launched attacks on Houthi assets in Yemen, Houthi attacks on commercial ships did not stop. The group said the attack on the ship was a response to Israel's military operation against Hamas in the Gaza Strip.
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A cargo ship transits through the Suez Canal in Ismailia, Egypt, December 29, 2023. (Fareed Kotb/Anadolu/Getty Images)
Professor of Management Robert Handfield said: “This will result in significant costs and delays for cargo to and from the Middle East, Europe and other parts of the region that rely heavily on the Suez Canal.'' It's happening,” he said. previously told FOX Business about supply chain management at North Carolina State University.
UBS estimates that ships circumnavigating Africa will add about two-and-a-half weeks to their journeys and reduce effective capacity for travel between Asia and Europe by about 25%.
Drought-like conditions in the Panama Canal are exacerbating the pain of attacks in the Red Sea. Handfield said extremely low water levels have limited the number of ships passing through the Panama Canal, further boosting global shipping.
According to Osama Rabie, head of the Suez Canal Authority, ship traffic from January 1 to January 11 was down about 30% compared to the same period a year ago. The number of ships passing through the canal this year has fallen to 544 vessels so far this year, a significant decrease from the 777 vessels recorded during the same period in 2023.
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In this photo released on November 20, 2023, Houthi fighters stand on the deck of the Galaxy Leader cargo ship in the Red Sea. (Houthi military media/handout/file/Reuters photo)
Container shipping giant Maersk suspended use of the Red Sea and Suez Canal at the beginning of the year after one of its ships was attacked by Houthi militants. The company said it would divert all ships around Africa for the “foreseeable future” and warned of a “significant” impact on global growth as a result of the disruption.
Rising transportation costs and potential disruption to global trade routes are raising concerns about a trade crisis. resurgence of inflationThis comes at a time when price pressures within the U.S. economy are finally beginning to ease. crude oil price It has been rising since the start of the new year as the US ramps up its military response to attacks.
Analysts at Bank of America warned in a note this month that disruptions in the Panama Canal, as well as the Red Sea and Suez Canals, could delay the recent decline in inflation.
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“Higher shipping costs due to Red Sea issues and lower Panama Canal water levels may also dampen the potential for further declines,” they wrote.
FOX Business' Alexa Angelus contributed to this report.
