Missiles in Red Sea drive up ocean freight prices

Posted at January 14, 2024 » By : » Categories : News » Comments Off on Missiles in Red Sea drive up ocean freight prices

Recent missile strikes in the Red Sea have affected the global supply chain, particularly in ocean freight shipping.

The US and UK military carried out these strikes in response to Houthi militia attacks on merchant ships, numbering 27 incidents since 19th November.

Peter Sand, Chief Analyst from Xeneta, a shipping intelligence platform, noted potential short term disruptions and increased costs due to these events.

Mr Sand said: “Vessels are already avoiding the area due to the Houthi attacks and the US and UK missile strikes are unlikely to change that. The longer this crisis goes on, the more disruption it will cause to ocean freight shipping across the globe and costs will continue to rise.

“This means goods being delayed, or not arriving at all, and rising prices for the end consumer.”

The attacks prompted shipping vessels to change routes, adding complexity to the delivery process.

This is expected to result in a significant rise in ocean freight shipping rates, with data from Xeneta suggesting possible increases of up to 200% since mid-December in the coming week.

Such cost surges may impact the broader global supply chain, causing potential delays and higher consumer prices.

The Treasury has reportedly simulated scenarios where disruptions to Red Sea shipping lanes could lead to a surge in oil and gas prices, potentially causing another energy price shock.

Unite General Secretary Sharon Graham said: “Once again, we can see how the choices of successive governments have left the UK exposed to energy price shocks.

“While in other countries workers and communities benefit from the protections of public ownership and proper regulation, in the UK we are left at the mercy of market forces and the companies that seek to take advantage of them.

“Our country lags far behind our European neighbours in terms of ownership and regulation of the energy industry. This leaves us vulnerable to unaffordable prices rises, much higher bills and even potential supply disruptions. The Houthi conflict once again demonstrates that we have to change direction.”

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