Attacks on Red Sea shipping may end up raising prices for U.S. consumers because cargo carriers must transition to longer routes to avoid dangerous areas, reports The Washington Post.
In December Houthi rebels backed by Iran struck cargo ships with drones and missiles in Yemen, claiming retaliation for Israel’s actions in the Gaza war. These attacks forced shipping leaders Maersk, CMA CGM, and COSCO to reroute shipments.
According to Ryan Petersen, CEO of logistics technology company Flexport, shipping carriers expect services to avoid the Red Sea through China’s Lunar New Year Festival, which occurs in mid-February. The rerouting solution will affect goods shipped from Asia to the U.S. East Coast.
“It’s about an eight percent longer journey, which is going to drive prices up quite a bit for ocean freight—that’s a material impact on prices for the goods themselves,” Petersen said.
Richard Danderline, CFO of Staxxon, a shipping container maker, said that, although the conflict immediately affects the Red Sea, the added traffic to other marine passages will “metastasize to the entire world,” implying a butterfly effect of shipping conflict. Full Story
In the Black Sea, a contentious area due to the ongoing Russia-Ukraine conflict, the passage of food out of Ukraine continues to be a problem. Due to Russia’s blockade of Black Sea ports, Ukraine has created a Black Sea corridor as an alternate route; however, the area is considered “too small to meet real needs,” according to Reuters.
Transport and logistics difficulties led to a seven percent year-on-year drop as of November in Ukraine’s exports of food and agricultural commodities and pushed up the cost of imported food, according to the National Institute of Agrarian Economics. Full Story (Subscription Required)
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