Attacks on commercial and military ships in the Red Sea by the Houthi rebels haveaccording to experts, financial consequences which remain limited – provided the crisis does not last…

Sailing under pressure

Attacks on merchant ships have multiplied in recent weeks between Africa and Yemen. About 12% of maritime trade normally passes through the Bab al-Madeb straits, which control access to the Red Sea, but since mid-November the number of containers has decreased by 70%according to shipping experts.

Many shipowners preferred to stop traffic in this zone and to use the alternative route around the South African Cape of Good Hope, which is longer and more expensive.

Adding to the difficulties is the fact that another region of the world is affectedthis time because of climate change. The drought affecting the Panama Canal has greatly slowed the passage of ships between Asia and the United States. While in normal conditions around 40 container ships use this sea lane each day, this number dropped in mid-January to 24 daily crossings.

Delays and outages

Businesses have already announced delays, such as the giant Swedish furniture company Ikea. “The situation at the Suez Canal will cause delays,” the company explained in an email to AFP.

Problems have also arisen in car production. Tesla thus clarified that its production will be suspended for two weeks at its European factory, from January 29 to February 11. Volvo’s factory in Ghent, Belgium, is also set to be closed for three days in mid-January as it runs out of gearboxes, the delivery of which has been delayed due to “seaway adjustments”.

“Equipment or electronics product businesses may experience delays. For those working with very small stocks, this can prove problematic,” Allianz Trade economist Ano Kuhanathan told AFP.

In Spain, the Association of Manufacturing and Distribution Companies (AECOC) announced that many sectors have placed advance orders for certain raw materials and goods, such as furniture or textiles, for which they are experiencing supply difficulties.

End Liquefied natural gas (LNG) transport ‘will be affected’ by Red Sea escalationQatar’s Prime Minister Mohammed bin Abdulrahman Al-Thani said yesterday, Tuesday, at the World Economic Forum in Davos.

What are the effects on prices?

Shipping companies proceeded with significant price increases to cover the costs associated with the crisis. One of the benchmarks for measuring the cost of transporting goods from China, the Shanghai Containerized Freight Index (SCFI) more than doubled in a month.

The extra cost in terms of fuel is about 20%according to logistics platform Container xChange, which estimates that the Red Sea crisis will increase shipping costs by 60%, with a 20% surcharge on shippers’ insurance coverage.

This raises the specter of a new inflation. These fears were assessed by the international office Oxford Economics at 0.7 of a point of extra global inflation at the end of the year 2024, in the scenario in which “the Red Sea will be closed to ships for months and transport costs will remain around twice of the December price”.

Everything will therefore depend on how long the crisis will last. “Sailing Africa and not going through the Suez Canal is more expensive and a longer distance. But at the moment it is more of a security problem than a logistical one,” said Siegfried Russwurm, president of the BDI, the organization of German industries, yesterday, Tuesday.

The day before, European Economic Commissioner Paolo Gentiloni had warned: “What is happening in the Red Sea does not seem to have consequences for energy prices and inflation for now. But we believe that we must monitor the situation very closely because these consequences may appear within the coming weeks.”

“We must remind that traffic has not been completely stopped”, comments Ano Kuhanathan of Allianz Trade. Nevertheless “the risk of inflation can be significant.”