Exporters looking for safer air and land routes to avoid Red Sea attacks

Experts warn prices of fuel and goods going to Europe will increase substantially due to the costs of diversion

A container ship crosses the Gulf of Suez towards the Red Sea before entering the Suez Canal, east of Cairo. Reuters
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Exporters are looking to find alternative air, land and ocean routes to transport everyday items such as apparel, tea and car parts to retailers as the wave of attacks continue in the Red Sea.

Iran-backed Houthi militants in Yemen have stepped up attacks on vessels in the Red Sea since November 19 to show support for Gaza.

The attacks have disrupted a key trade route linking Europe and North America with Asia through the Suez Canal.

Container shipping costs have surged as companies seek to move goods via other, often longer, ocean routes.

If there are extended disruptions, the consumer goods sector that supplies the world's top retailers such as Walmart and Ikea will face the biggest impact, S&P Global said in a report.

Alan Baer, chief executive of OL USA, has teams advising shipping and logistics clients to prepare for at least 90 days of Red Sea disruptions.

“It doesn't help that it's Christmas weekend,” said Baer. “We'll have a quiet period from now until January 2, and then everybody will be frenetic.”

Some companies are already trying to switch to so-called intermodal transport, which can involve two or more modes of transport, said Jan Kleine-Lasthues, chief operating officer for air freight at German freight forwarder Hellmann Worldwide Logistics.

Hellmann has registered increased demand for combined air and sea routing for consumer goods such as apparel, as well as electronics and tech items.

That could mean goods being transported first by sea to a port in Dubai, where they are then loaded on to planes.

How could Houthi attacks in the Red Sea affect global trade?

How could Houthi attacks in the Red Sea affect global trade?

“This alternative route allows customers to avoid the danger zone in the Red Sea and the long voyage around the southern tip of Africa,” Mr Kleine-Lasthues told Reuters.

While companies moving urgent or critical items might opt to use air freight, the expense means it is not a blanket solution, said Paul Brashier, vice president of drayage and intermodal at supply chain group ITS Logistics.

Moving goods by air costs roughly five to 15 time more than by sea, where container shipping rates are still low by historical standards, said Brian Bourke, global chief commercial officer at Seko Logistics.

If the time it takes to get goods to shelves doubles, more shippers will switch to air – especially for high value goods such as designer clothing and high-end electronics, said Mr Bourke, who has already received queries from customers.

Major trade route

About 35,000 vessels sail through the Red Sea region annually, moving goods between Europe, the Middle East and Asia, representing about 10 per cent of global GDP, said Corey Ranslem, chief executive of British maritime risk advisory and security company Dryad Global.

US retailers including Walmart, Target, Macy's and Nike depend on the route to get goods ranging from cotton sheets and electric toothbrushes from India to footwear from China and Sri Lanka.

“Under an extended threat you will see the price of fuel and goods into Europe increase substantially because of the increased costs of diverting around Africa, which can add roughly 30 days to a transit depending on the arrival port,” Mr Ranslem said.

Shipping companies remain in the dark over a new international navy coalition being assembled by the US aimed at stabilising the area.

A Spanish fashion industry source told Reuters shipping lines were telling customers a lot was riding on the US-led task force and whether it can prevent more attacks and make the route safe again.

Meanwhile, large container ship owners have begun adding fees, including emergency surcharges, for cargo affected by the Red Sea disruptions.

Updated: December 21, 2023, 6:08 AM