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No Respite for Red Sea Trade Disruptions

No Respite for Red Sea Trade Disruptions

(16 January 2024 – Egypt) Major freight shipping CEOs fear threats to disrupt Red Sea shipping will stretch out for weeks or months longer, reigniting damaging supply chain disruptions.

Following reclassification as a terrorist organisation by the Biden administration, the Houthi rebel attacks in retaliation to the Israel-Gaza conflict are set to extend delays and raise transport costs for companies’ dependent on goods flowing along trade lanes that link the world’s largest markets.

Supply chain disruptions throughout the pandemic attributed directly to the initial bout of inflation that occurred before energy prices spiked in the wake of the Russian invasion of Ukraine. The Panama Canal is also grappling with drought induced capacity restrictions, further exacerbating shipping gripes.

“For us, this will mean longer transit times and probably disruption of supply chains for a few months at least. We hope the unrest will end sooner than that, but it could also be longer because it’s so unpredictable how this situation is developing. The situation in the Red Sea is extremely disruptive” stated AP Moller - Maersk A/S CEO Vincent Clerc.

The rerouting of ships around southern Africa instead of the shortcut through the Suez Canal is leading to imbalances in container capacity. As a result, shortages might start to occur in about two weeks, hitting Asia in particular. The back flow is currently not happening at the pace people were planning for, so that’s something to monitor” commented DHL Group CEO Tobias Meyer.

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