Vincent Clerc, CEO of Maersk, the shipping industry leader, has issued a warning about potential long-term disruptions for ships navigating the Red Sea. This situation, sparked by a series of attacks, could lead to increased prices in retail stores.
Clerc described the halt of the crucial maritime passage, which is typically used by vessels to connect the Arabian Sea with the Mediterranean, as “brutal and dramatic”. Following these incidents, attributed to Houthi rebels from Yemen, ships are now rerouting via the southern tip of Africa, a significantly longer and more expensive journey.
In a statement to the Financial Times, Clerc expressed uncertainty about the timeframe needed to safely resume travel through the Red Sea, suggesting it could range from days to months. He emphasized the broader impact this could have, potentially affecting global economic growth.
This warning aligns with recent data from the Kiel Institute, which indicated a dramatic drop of over 50% in container shipping through the Red Sea in December.
In December, container shipping through the Red Sea experienced a significant decline, with volumes plummeting to around 200,000 containers per day from approximately 500,000 in November. This represents a 66 percent decrease from the expected volume based on freight data from 2017 to 2019.
Ships are now circumnavigating Africa via the Cape of Good Hope instead of passing through the Red Sea, adding 7 to 20 days to their journey. This extended travel time has led to a substantial rise in freight rates. The cost of shipping a 40-foot standard container from China to Northern Europe has escalated to over 4,000 US dollars, a stark increase from around 1,500 US dollars in November. However, these rates are still significantly lower than the peak prices during the COVID-19 pandemic, when the same journey could cost up to 14,000 US dollars.
Despite the hike in transportation costs, no significant impact on consumer prices in Europe is anticipated. This is particularly true for high-value items like consumer electronics, where freight costs constitute only a tiny fraction of the overall value.
Overall, the primary effects of this shift are slightly longer delivery times for goods from the Far East and increased freight rates. However, the global container shipping network is expected to adapt quickly, and no major negative impacts on global trade are foreseen.
