The ongoing attacks by Houthi rebels on vessels in the Red Sea is causing a ripple effect through the global supply chain, leading to imminent freight price increases and extended delivery times for various goods. Starting Monday, freight costs are expected to rise sharply, exacerbated by the necessity to reroute around Africa which delays deliveries.
Ocean carriers, struggling to return to Asia promptly, are cancelling sailings with little notice due to these diversions, as reported by Honour Lane Shipping to its clients. Affected products include spring clothing, electronics, and furniture, with retailers like Next and Ikea already noting potential stock delays.
The impact of longer transit times and elevated costs on supply chain reliability is significant. Retailers are responding by adjusting their shipping strategies, including rerouting shipments to the West Coast.
The most significant change comes in the form of increased freight rates. MSC, a leading global ocean carrier, announced new rates effective Monday, illustrating the rate hikes. The rates are set to be $5,000 for U.S. West Coast routes, $6,900 for East Coast routes, and $7,300 for routes to the Gulf of Mexico. These increases are a direct response to the altered shipping landscape and the need for carriers to cover additional costs incurred by longer, alternate routes.
According to Kuehne + Nagel, 419 vessels, with a capacity of 5.65 million TEUs, are rerouted due to the Red Sea situation, affecting the Suez Canal traffic and, by extension, Egypt’s revenue from canal transit fees.
Logistics companies are also bracing for a container shortage, a throwback to the challenges faced during the Covid pandemic. This shortage, coupled with the rerouted and delayed shipments, could lead to more turbulent times ahead in 2024. Only time will tell.
