The frequent Houthi rebel attacks in the Red Sea have led to a drastic drop in container shipments. The diversion of ships around Africa due to the attacks extends the transport time between Asia and Europe by up to 20 days. The extended sea route significantly increases freight rates. Nevertheless, experts do not expect any noticeable impact on consumer prices in Europe.
The volume of freight containers transported on the Red Sea fell by more than half in December compared to November, from 500,000 to 200,000 containers. The Houthi rebels are to blame for this bloodletting. Because of their repeated attacks on cargo ships in the Red Sea, many shipping companies would switch to alternative routes, a study by the Kiel Institute for the World Economy (IfW) concludes.
Up to 20 days longer travel times
“The diversion of ships due to the attacks in the Red Sea around the Cape of Good Hope in Africa means that the time for the transport of goods between Asian production centers and European consumers is significantly extended by up to 20 days.” This was said by the director of the Trade Policy Research Center, Julian Hinz. This is also reflected in the declining trade figures for Germany and the EU, as transported goods are now still at sea and are not being unloaded in the ports as planned.
World trade is declining slightly
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According to the calculations, world trade fell by 1.3 percent from November to December, adjusted for price and seasonally. A decline in both exports (-2.0 percent) and imports (-3.1 percent) is predicted for the EU. China’s trade is growing against the trend: exports (+1.3 percent) and imports (+3.1 percent) are pointing upwards. One reason for this is likely to be the upcoming Chinese New Year, which is driving up retail sales, according to the IfW.
The extended travel time has significantly increased freight rates: transporting a 40-foot standard container between China and Northern Europe currently costs more than $4,000, up from around $1,500 in November. However, the current price is still a long way from the spikes during the corona pandemic, when transporting a container on this route cost up to $14,000.
UN Security Council passes resolution calling for end to Houthi attacks
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The UN Security Council has passed a resolution calling for an end to attacks by Iran-backed Houthi rebels in Yemen on merchant ships in the Red Sea. The paper passed in New York on Wednesday condemns the attacks and calls for them to be “stopped immediately”. Eleven countries voted in favor – Russia, China, Algeria and Mozambique abstained.
The vote was postponed by a few hours at short notice because Russia had submitted several additional requests, but all of them were rejected.
Since the Gaza war broke out between Israel and the Islamist Hamas, the Houthis have repeatedly attacked ships with alleged Israeli connections in the Red Sea.
According to IfW expert Hinz, despite a noticeable increase in transport costs, no noticeable consequences for consumer prices in Europe are to be expected. This is mainly due to the fact that the proportion of freight costs in the value of high-priced items, for example in the consumer electronics sector, is only in the per mille range, said Hinz.
No negative consequences for global trade are expected.
The situation is not comparable to the environment during the Evergiven disaster in the Suez Canal and the pandemic, when lockdowns led to a collapse in the supply of goods and at the same time demand in Europe soared. “Apart from a currently slightly longer delivery time for products from the Far East and increased freight costs, to which the container ship network should quickly adapt, no negative consequences for global trade are to be expected,” said Hinz.