Houthi Attacks Force Rerouting Of More Than 100 Ships, Impacting Global Trade

Attacks by the Houthi rebels on ships near Yemen’s western coast have forced the relocation of more than 100 container ships from the Suez Canal. Major shipping companies Kuehne and Nagel have counted 103 vessels that have already changed route; more reroutings are expected in the area of southern Africa’s Cape of Good Hope.

This diversion adds 6,000 nautical miles to the regular route from Asia to Europe, which might result in three or four weeks of extra delivery time. The Iranian-aligned Houthi rebels point to Israel’s operations in Gaza as the impetus, claiming responsibility for the assaults. The United States has declared its intention to head a naval alliance to protect shipping in the Suez Canal.

The diversion of oil and gas tankers, such as BP, has increased oil prices. Prices for Brent crude oil increased by 1.2% to above $80 from below $74 the previous week. The disruption may cause a 20% reduction in the world’s fleet capacity, delaying the deployment of shipping resources.

Furthermore, the overall stability of the supply chain may be further challenged by delays in returning empty equipment to Asia. The impacted ships can accommodate 1.3 million 20-foot containers, and businesses worldwide—including big automakers—are monitoring the issue in case it affects their supply chains.

While a longer-term disruption in shipping patterns may eventually lead to shortages of consumer products or manufacturing components, the disruption also coincides with temporary factory closures for Christmas.

Despite these difficulties, it is projected that the disruption would not impact the retail sector over Christmas because inventory is usually built up ahead of time. The Ever Given container ship halted passage via the Suez Canal for six days in March 2021, marking the final significant unplanned canal blockage.

Reference: The Guardian

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