International shipping "artery" blocked, shipping giants have stopped, how will this crisis affect the global textile and clothing supply chain?
A 20-mile strait is pinching the arteries of the global supply chain. As a number of ships travelling to the Red Sea waters were attacked, many international shipping companies have announced the suspension of navigation in the Red Sea. At the same time, the Suez Canal connecting the Red Sea and the Mediterranean Sea is facing the risk of closure, coupled with the Panama Canal has been blocked for a long time, the cost of shipping is facing the risk of jumping in the short term, the global supply chain to add insult to injury.
Frequent Attacks on Cargo Ships
Cargo ships in the Red Sea - the news of attacks near the Strait of Bab al-Mandeb is becoming more and more frequent.
On the 15th, Hapag-Lloyd's cargo ship Al Jasrah was attacked by a drone and caught fire near the Bab-el-Mandeb Strait. A few hours later, the MSC Palatium III was hit by two ballistic missiles, one of which caused a fire.
Responsibility for the incident itself is not in doubt. On Friday a spokesman for Yemen's Houthi militia, Yehia Sareea, confirmed responsibility for the attacks and said the ships were attacked because their crews refused to respond to calls from the Yemeni navy, adding that the Houthis only attacked ships travelling to ports in Israel, and that ships travelling elsewhere would not be attacked, as long as they "make sure that the identification equipment is always on". ".
In light of the recent spate of attacks on ships, the vessels under attack represent a large number of crew members, shipowners, cargo owners, and other stakeholders from a variety of countries. Despite the Houthis' claims that they only want to stop Israeli-related shipping, over time the Houthis have now begun indiscriminate attacks on merchant ships in an attempt to stop global trade from passing through the Bab-el-Mandeb strait.
As a result of this, Hapag-Lloyd announced on the 15th that it was suspending all container ship traffic through the Red Sea from now until the 18th. Danish Maersk Line Group also announced on the same day, suspended all container ship transport through the Bab-el-Mandeb Strait and the Red Sea. Mediterranean Shipping Company and France's Duffy Marine Group on the 16th asked its cargo ships to suspend navigation in the Red Sea, avoiding the Suez Canal route.
Conflict affects global maritime transport
The Bab-el-Mandeb Strait is a 20-mile (32-kilometre) wide strait between Yemen on the Arabian Peninsula and Djibouti and Eritrea on the African coast, it is said. The Suez Canal, one of the world's most important shipping lanes, is a man-made canal that connects the Red Sea to the Mediterranean Sea. Both are essential for the Asia-Europe route.
Some 17,000 ships and 10 per cent of global trade pass through it every year. Any ship travelling through the Suez Canal to or from the Indian Ocean must pass through the Bab-el-Mandeb Strait.
As the conflict intensifies, the global shipping market is in a state of disarray. Commenting on the impact of the conflict on trade and the shipping industry, Peter Sand, principal analyst at maritime consultancy Xeneta, said: It is highly unlikely that the Suez Canal will be closed, but there is still a risk of that happening.
The only option for shipping companies to avoid the Red Sea and the Bab-el-Mandeb is to go around the Cape of Good Hope at the southern tip of Africa, but this would add 10 days to the sailing time. Media reports say Maersk is considering rescheduling its vessels to sail around Africa and avoid the Red Sea. The International Chamber of Shipping (ICS) has also said that some companies are already rerouting around the Cape of Good Hope, which would add to global trade costs and delays. The industry is understood to be considering additional actions that could lead to more ships being re-routed.
But this will undoubtedly push up transport costs. According to S&P Global Commodity Insights' calculations, the Singapore-Rotterdam route, for example, would normally enter the Red Sea from the Bab-el-Mandeb Strait and then cross the Suez Canal into Europe; if it were to bypass the Cape of Good Hope, the southernmost point in Africa, the entire voyage would be 40 per cent longer.
Impact on the textile supply chain
Right now, the severe drought that has restricted traffic in the Panama Canal and the intensifying geopolitical conflict that is forcing ships to bypass the Suez Canal would be disastrous for global shipping. Low global demand has weakened the impact on commodity and consumer prices, says Inga Fechner, economist at ING. But in the long run, higher transport costs will have a trickle-down effect that will ultimately hit consumers. Increasing costs and the search for alternative routes will add to costs and may ultimately affect prices as well.
According to S&P Global, containers bound for the Middle East will now be subject to a war risk surcharge of $100 per TEU (TEU) for both dry and reefer cargoes. Meanwhile, North Asia-U.K. container freight rates going through the Red Sea-Suez Canal have risen to a new 2023 high.
"The latest round of attacks demonstrates once again that the Houthis' actions pose a significant risk to international maritime transport", the US Central Command said. The London insurance market has classified the waters of the southern Red Sea as a high-risk area. Merchant ships travelling through this area must inform their insurers in advance and take out additional war risk insurance. Analysts believe that if tensions in the Red Sea and its surrounding waters increase and international shipping continues to be disrupted, it will be difficult for the international supply chain to avoid being impacted.
