On January 26, the cargo ship Marlin Luanda was hit by a Houthi missile while traveling in the Red Sea – Photo: X/IRAN OBSERVER
According to AP News Agency, at the end of October 2023, the Houthi rebel group (currently occupying most of Yemen’s territory) began attacking cargo ships and US warships escorting them in the Red Sea.
The Houthis affirmed that this action was intended to show their support for the fight against Israel by another Muslim armed group – the Palestinian Hamas movement in the Gaza Strip.
With the Houthis controlling the mainland right around the Bab el-Mandeb Strait – the only gateway to the southern Red Sea, almost no ship passing through here is safe from the risk of being attacked by this group.
This directly affects world trade when the Red Sea is the only sea route leading from the Indian Ocean into the Suez Canal to go to the Mediterranean. In other words, this is the shortest sea route for goods to go from Asia to Europe.
However, to ensure safety, major commercial shipping lines have decided to abandon this shortcut and choose to go around Africa. This causes travel time to increase by more than 25%, dealing a strong blow to the world supply chain.
“What is happening is short-term chaos, and chaos will lead to rising prices. Each ship must change its route to carry 10,000 containers. This means that many emails and calls need to be made to recalculate the path of each vehicle,” said CEO of supply chain management company Flexport Ryan Petersen.
Unfortunately, the global shipping industry is also struggling with the fact that the Panama Canal – another important maritime shortcut – is not operating at maximum capacity due to drought.
With the lock design, which uses water to lift ships from low places to higher places, the operation of the Panama Canal depends greatly on water supply.
Right now it’s fine, if left for a long time it will be “damaged”.
Comparison of the length of the voyage from Asia to Europe along the Red Sea route and the route around Africa – Graphic: AP/NGOC DUC transliterated
Man & Machine Company, which specializes in manufacturing hospital equipment, is one of the typical victims of supply chain disruption.
This Maryland-based company is waiting for a shipment of materials from Taiwan and mainland China. Normally, this batch will go from Asia through the Indian Ocean, through the Red Sea and the Suez Canal to the Mediterranean. From here, the ship will cross the Atlantic Ocean to Maryland.
The inability to go through the Red Sea route forced the above shipment to switch to the option of crossing the Pacific Ocean, through the Panama Canal to reach the east coast of the United States. However, this shipment was blocked here due to the water shortage situation.
Therefore, the above shipment may have to use a third option: going back to the Pacific Ocean, to the city of Los Angeles on the west coast of the United States. From here, a truck carrying the above shipment will travel across the entire width of the country to Maryland.
The above shipment clearly shows the importance of the Red Sea, as well as the severity of the crisis taking place on this route that serves up to 20% of container volume and 10% of global seaborne trade.
In fact, the Red Sea crisis has not yet affected the entire world supply chain. Businesses’ adjustments after the disruption during the COVID-19 pandemic have significantly increased the endurance of this chain.
In addition, people’s shopping needs in many places are low due to governments’ economic tightening policies. Massive production to meet skyrocketing demand immediately after the pandemic also helps businesses own a large amount of inventory, enough to help them meet market demand for a while despite lacking raw materials for production.
However, if not ended soon, the crisis could completely have long-term consequences for the world economy. Right now, the cost of shipping a standard container from Asia to Northern Europe has increased from $1,500 at the end of December 2023 to $5,500.
For brave shipowners who still choose to go through the Red Sea, their insurance premiums have increased tenfold, according to Bloomberg News.
Mr. Petersen affirmed that if it lasts a year, the Red Sea crisis could push the inflation rate of consumer goods up to 2%, reversing all recent efforts to curb inflation in the world.
According to Tuoi Tre
