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Companies rush to avert disruption from Red Sea attacks

December 19, 2023 at 5:30 pm

A screen grab captured from a video shows that cargo ship “Galaxy Leader”, co-owned by an Israeli company, being hijacked by Iran-backed Houthis from Yemen in the Red Sea on November 20, 2023. [Houthis Media Center – Anadolu Agency]

Sweden’s Electrolux has set up a task force to find alternative routes or identify priority deliveries, as companies scramble to avoid any disruption from the attacks by the Yemeni Houthi group on ships in the Red Sea, Reuters reports.

The world’s top appliance maker is the latest company to act after recent attacks on vessels forced leading shipping companies, including Maersk to reroute around the Cape of Good Hope to avoid the Suez Canal.

Electrolux said, late on Monday, it was considering the measures, but it currently estimates the impact on deliveries will be limited. The Swedish group has worked with shipping companies such as Maersk and CMA.

The Suez Canal, the shortest shipping route between Europe and Asia, accounts for about 12 per cent of the world’s shipping traffic.

Defence Secretary, Lloyd Austin, said on Tuesday the United States was leading a multinational operation to safeguard commerce in the Red Sea.

READ: US escalates Israel aggression on Gaza with naval plan against Houthi attacks on Red Sea

The attacks have stirred memories of 2021 when container ship, “Ever Given” ran aground in the Canal, blocking dozens of container ships carrying products ranging from mobile phones to designer goods for six days.

The episode aggravated supply strains caused by the coronavirus pandemic, delaying shipments of goods by months and sending freight rates soaring.

Now, with more container shipping capacity available, analysts and experts do not see as severe a crunch, but they do expect freight rates to rise.

Extra $1 million 

The longer trip will cost up to $1 million extra in fuel for every round trip between Asia and Northern Europe, according to estimates from freight platform, Xeneta.

Retailers and manufacturers will likely pass on the higher costs to consumers, potentially boosting inflation during a prolonged cost-of-living crisis.

“This is a cost that will ultimately be passed on to consumers who are buying the goods,” said Peter Sand, chief analyst at Xeneta.

Delays to shipments will not affect Christmas holiday shopping, but there is the potential for shops to run low on stock by February if the delays continue, supply chain research firm, Project44, said in a note on Tuesday.

“After the peak shopping season through the holidays, it is possible that inventories will be depleted,” it said.

Travelling via southern Africa will add about 10 days on to a journey from Asia to North Europe and the East Mediterranean, experts said. It typically takes about 27 days to sail from Shanghai in China to the Dutch port of Rotterdam.

On Monday, US fertiliser company, Mosaic, said it had re-routed a couple of US-bound shipments around the Cape of Good Hope.

Dairy giant, Danone, said most of its shipments had been diverted, increasing transit times. Should the situation continue beyond two to three months, the group will activate mitigation plans, including using alternate routes via sea or road wherever possible, a spokesperson said.

READ: Kremlin: Russia is not a party to US-led security operation in Red Sea