Search Company:
LONDON — Attacks by Iran-backed militants in the Red Sea have effectively closed one of the world’s main trade routes to most container ships — vessels that carry everything from car parts to Crocs from one corner of the globe to another.
A prolonged closure of the waterway, which connects with the Suez Canal, could snarl global supply chains and drive up the prices of manufactured goods at a crucial moment in the battle to defeat inflation. The Suez Canal accounts for 10-15% of world trade, which includes oil exports, and for 30% of global container shipping volumes.
The Houthi militants, based in Yemen, say they are taking revenge for Israel’s war against Hamas in Gaza. The US military and its allies have beefed up maritime security but the attacks continue — 21 Houthi missiles and drones were shot down late Tuesday.
As the crisis persists, the stakes for the global economy are rising.
Global trade fell 1.3% from November to December, Germany’s Kiel Institute for the World Economy said Thursday, citing “consequences of the attacks on cargo ships in the Red Sea.”
Retailers are warning of shipment delays, and the cost of moving goods by sea is increasing.
In a biannual report released Tuesday, the World Bank warned that the disruption to key shipping routes was “eroding slack in supply networks and increasing the likelihood of inflationary bottlenecks.”
Six of the 10 biggest container shipping companies — namely Maersk, MSC, Hapag-Lloyd, CMA CGM, ZIM and ONE — are largely or completely avoiding the Red Sea because of the threat from the Houthi militants.
The danger to crew, cargo and vessels has forced carriers to reroute ships around the Cape of Good Hope in South Africa, resulting in delays of up to three weeks. Maersk CEO Vincent Clerc told the Financial Times Thursday that re-establishing safe passage through the Red Sea could take “months.” “It could potentially have quite significant consequences on global (economic) growth,” he added. Read more
Source: CNN BUSINESS
