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| Red Sea shipping rerouting adds costs, delays for suppliers, retailers |
Time:2024-01-04 15:41:59 |
TOYMAKER Basic Fun's team that oversees ocean shipments of Tonka trucks and Care Bears for Walmart and other retailers is rushing to reroute cargo away from the Suez Canal following militant attacks on vessels in the Red Sea, according to Reuters.
Suppliers for the likes of IKEA, Home Depot, Amazon and retailers around the world are doing the same as businesses grapple with the biggest shipping upheaval since the Covid-19 pandemic threw global supply chains into disarray, sources in the logistics industry said.
China factories send their goods via the Suez Canal, the quickest way to move goods between those geographies, CEO Jay Foreman said in a telephone interview from his Hong Kong office.
That trade route is used by roughly one-third of global container ship cargo, and re-directing ships around the southern tip of Africa is expected to cost up to US$1 million extra in fuel for every round trip between Asia and Northern Europe.
Yemeni Houthis have launched drone and missile attacks in the Red Sea to show their support for Palestinian Islamist group Hamas fighting Israel in Gaza which have upended shipping plans.
Basic Fun is now working through the holidays to send toys from China to ports in the UK and Rotterdam via the longer route.
It is also diverting some goods bound for ports on the US East Coast from the Suez Canal to the drought-choked Panama Canal, while switching others to the West Coast via the direct route across the Pacific Ocean.
"It's just going to take longer and it's going to cost more," said Mr Foreman, who added that rates for some China-UK freight have more than doubled to around $4,400 per container since the Israel-Hamas conflict began in October.
The biggest impact likely will come over the next six weeks, said Michael Aldwell, executive vice president of sea logistics for Switzerland's Kuehne + Nagel.
"You can't flick a switch" and reorganize global shipping, said Mr Aldwell, who expects the diversions to cause a shortage of vessel space, strand empty containers needed for China exports in wrong places and send short-term transport price indexes sharply higher.
According to estimates from freight platform Xeneta, it costs $2,320 to ship a 40-foot equivalent unit (FEU) container from the Far East to the Mediterranean "post escalation" versus $1,865 per FEU in early December. It costs $1,625 to ship an FEU from China to the United Kingdom "post escalation" versus $1,425 per FEU in early December.
These rates do not include "extra ordinary" risk surcharges and "Emergency Recovery Cost" that can be between $400 and $2,000 per FEU, Peter Sand, chief analyst at Xeneta, said.
Mitsui OSK Lines and Nippon Yusen, Japan's largest shipping companies, said their vessels with links to Israel were avoiding the Red Sea area and both companies were monitoring the situation carefully for next steps. |
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