Red Sea Crisis Soars Higher In Damages Than Covid 19 For supply Chain: Maritime Advisory
Houthi attacks in the Red Sea are seemingly bringing in more damages to the supply chain than the early Covid 19 pandemic. According to Sea-Intelligence, a supply chain advisory firm, the current vessel delays due to the longer transit around the Cape of Good Hope is having larger impacts on vessels available to pick up containers at ports.
The drop in the vessel capacity (vessels available to pick up containers) is the second largest in recent years. Before the Red Sea crisis, the only event that caused bigger impact was when the giant cargo ship “Ever Given” got stuck in the Suez Canal for six days in March 2021, which halted billions in trade. Apart from that, “this (the Red Sea crisis) is the largest single event – even larger than the early pandemic impact”, said Alan Murphy, CEO of Sea-Intelligence.
Sea-Intelligence and other maritime officials estimated that there is approximately 10 percentage of the world’s feet that are not in service. If additional vessels are deployed, that could correct the imbalance in the vessel availability and increase certainty in vessels schedules. “To go around the Cape of Good Hope, ocean carriers need one or two additional vessels to offset the delays…ocean carriers are going to need to add vessels”, said Murphy. He said it is in everybody’s interest to solve the Suez canal issue.
Due to the delay in the arrival of the containers, some companies’ supply chains are impacted. Reportedly, Tesla, Volvo, and Michelin have recently said they were forced to stop manufacturing. Ikea, British retailers like Next and Crocs, has warned about delays of product.
Steve Lamar, CEO of American Apparel and Footwear Association said that, “threats to Red Sea shipping are a threat to maritime commerce worldwide”. He said although shipping companies are seeking for alternative options, “adverse knock-off effects” are continuing to disrupt the logistic globally. He added that more needs to be done to eliminate any existing or future threats to the safety of the crews and security of the cargo.
Adding more vessels to the current flow of trade may help with the potential ‘container crunch’. When the vessels are late to reach, the containers on the vessels will be late to be processed and reused again for exports. This will cause delay in exports from Europe to US as well as from Asia to US and other parts of the world.
The diversions from the Red Sea are also beginning to significantly impact on the energy markets and product tanker operators. As per data obtained from Kpler, a supply chain intelligence firm, since December 15, there have been 25 LNG vessel diversions from Red Sea to the Cape of Good Hope. According to Honour Lane Shipping, despite the US counter attacks, the Houthi attacks in the Red Sea could last from six months to a year.
With inputs from CNBC.
