A LEADING IRISH global supply chain business has expressed hope that attacks by Yemen’s Houthi rebels on cargo ships passing through the Red Sea wont create an ‘Ever Given’ situation.
It was estimated the the blockage of the 400 metre long Ever Given along the Suez Canal in 2021 held up $9.6 billion-worth of cargo between Asia and Europe for each day it was stuck.
However, Kevin Brady of Woodland Group noted that it could be a “potentially big issue” and that the attacks will cause at least a two-week delay on goods entering Ireland.
Goods on cargo ships from Asia that are destined for Ireland pass through Egypt’s Suez Canal, before landing in European ports.
From there, the goods are placed on smaller vessels which set sail to Ireland.
However, cargo ships are now tracing the west coast of Africa as opposed to travelling up the Red Sea towards the Suez Canal as a result of the Houthi attacks.
The Houthis, a Shiite Islamist movement which controls much of western Yemen including the capital Sana’a, have said they will only halt attacks if Israel’s “crimes in Gaza stop and food, medicine and fuel are allowed to reach its besieged population”.
According to the Pentagon, Houthi rebels have launched more than 100 drone and missile attacks, targeting 10 merchant vessels involving more than 35 different countries.
“It’s a deteriorating situation,” said Kevin Brady, director of global development at Woodland Group, which has 30 years’ experience in ocean freight.
“Effectively, all the main carriers and firms have decided, due to the safety of crews and also the cargo on board, that with missiles being fired they’re going to turn the vessels and bring them around the Cape of Good Hope.”
The Red Sea leads to the Suez Canal, a chokepoint for about 10% of global trade.
Last month, the rebels seized the Galaxy Leader merchant vessel, taking its 25-member crew hostage. Both the vessel and crew remain in Yemen.
Brady said this rerouting around the southern tip of Africa will add “between 10 and 14 days to cargo ships entering European ports”.
“From an Irish point of view,” explained Brady, “all of those vessels have got to go into the European port, there’s no direct services coming into Ireland.
“With immediate effect, anything that is south of the Suez Canal and hasn’t gone through, it’s a 10-to-14-day delay on anything on those vessels.”
He added that this will then cause congestion at European hubs, which could in turn result in further delays.
“The containers for Ireland have to be unloaded at European ports, put on a smaller vessel and then brought into the Irish ports.
“So it’s a minimum of a two-week delay but then we can expect further delays because of congestion in European ports,” said Brady.
“This is the fastest route into Europe, and we’re all at the mercy of this situation.”
Insurance costs have soared and the need to re-route vessels around the southern tip of Africa is resulting in higher fuel costs due to the much longer voyages.
Oil giant BP is among the carriers to have re-routed voyages, a move that sent up energy prices.
“Without doubt this is going to result in surcharges as well,” said Brady.
“There could be war-risk surcharges and other surcharges, so it’s not just the physical delay, there will be rate increases.”
Brady also noted that the vessels operate like “clockwork” and that once taken out of this tight schedule, it’s “very difficult to get them back onto it”.
“I don’t want to come across too negatively,” said Brady, “but these are the facts at the minute and there will undoubtedly be knock-on effects.
“Services are not going to be on schedule, so there’s going to be a delay and a buildup of cargo in the major China ports and Southeast Asian ports.
“This takes up space because if the vessels are late, pools of containers will gather in the ports in China, and then there are no vessels carrying empty containers back, so it’s a bit of a vicious circle.”
In March 2021, the 400 metre long Ever Given cargo ship became wedged diagonally across the Suez Canal, shutting the waterway in both directions.
It was on its way to the Dutch port of Rotterdam on 23 March, 2021, when it slammed into the bank of a single-lane stretch of the Suez Canal about 3.7 miles north of the southern entrance.
It held up an estimated $9.6 billion-worth (€8,75b) of cargo between Asia and Europe each day it was stuck.
“We don’t want to sound alarmist and we hope it won’t be a Covid or Ever Given situation but as long as that threat and risk is there, it’s down to whether those carriers will put vessels through this region,” said Brady.
“It’s potentially a big issue and the longer that goes on, the bigger the effect is going to be on the supply chain.”
Brady also remarked that while most people thought the issues caused by the Ever Given were solved upon its release, “that’s just when the problems started”.
“It’s the disruption to the schedule in these vessels, and these big vessels are like clockwork.
“Even with the disruption as it is now, the vessels will be delayed a minimum of two weeks in getting back to China, even before there is any further impact in European ports.
“And it’s the run-up to Chinese New Year on 10 February, there will normally be a peak to Chinese New Year and that needs to be considered as well.
“If the vessels are late getting back, then empty equipment is not there for new cargo, you can see the knock-on effect.”
The United States yesterday pushed to build up a multinational naval task force to protect the key shipping lane from Houthi rebels.
The group includes the United States, United Kingdom, Bahrain, Canada, France, Italy, Netherlands, Norway, Seychelles and Spain.
However, Houthi rebels yesterday pledged to continue the attacks.
“Even if America succeeds in mobilising the entire world, our military operations will not stop… no matter the sacrifices it costs us,” senior Houthi official Mohammed al-Bukhaiti said on X, formerly Twitter.
Brady questioned if this deterrent will be big enough to ward off further attacks and added: “All we all we can do is watch this space closely and talk with clients constantly and update them.
“A two or three-week delay, a lot of them can handle that, but it’s extra costs once the surcharges go up from 1 January.”
Analysts have also warned that the maritime task force can do little to halt the attacks by the Houthis, who command an arsenal of ballistic missiles, cruise missiles and drones.
“The Houthis have an extended arsenal of different drones and missiles that they can shoot… and some of them will be difficult to intercept by your average navy ship,” Andreas Krieg, a professor at King’s College London, told AFP.
Meanwhile, the Houthis have remained defiant and threatened to attack ships of any country that acts against them.
Other than ocean freight, companies can use rail or air services.
“The longer it goes then people will want those air and rail services, especially for urgent supply chains,” said Brady, “but they’re finite services and they don’t have the capacity or space you would have on an ocean service.
“Hopefully if this can be nipped in the bud it won’t become too much of an issue.
“But it’s supply and demand, if there’s pressure on any of those services and that demand goes up, invariably the price will go up as well.
“Is the deterrent big enough with these warships going into the area, are these rebels going to go away, I don’t think it’s an answer any of us can give, it’s out of our control.”
Brady also noted that while freight rates – which take account of fuel costs, insurance premiums and other charges – are “at a pretty low level at the minute”, he is anticipating a large increase from 1 January,
“There will be extra costs, be it a war-risk or just an emergency surcharge,” said Brady.
“It’s very concerning, without doubt there will be delays and extra costs involved, it’s now just about getting a handle on what that will look like.
“Hopefully this threat reduces but it’s certainly going to be a big challenge.
“Disruption to supply chains, extra costs involved, certainly not a very nice entry into the new year.”
-With additional reporting from AFP
To embed this post, copy the code below on your site
have your say