Exporters explore air freight options as Red Sea chaos deepens

Freightos

20/12/2023 18:34

By Jonathan Saul, Helen Reid and Corina Pons
       LONDON/MADRID, Dec 20 (Reuters) - Exporters are
scrambling to find ways to get key consumer goods to buyers
including by air as a wave of attacks in the Red Sea adds to
ocean freight supply chain problems elsewhere.
    Iran-backed Houthi militants in Yemen have stepped up
attacks on vessels in the Red Sea since Nov. 19 to show support
for Hamas as Israel's military offensive in Gaza continues.    
    The attacks have disrupted a key trade route that links
Europe and North America with Asia via the Suez Canal and pushed
container shipping costs sharply higher as companies seek to
move their goods via alternative, often longer, routes.
    Companies are now trying to switch to so-called intermodal
transport to maintain global supply chains, which involves a
combined sea and air route, said Jan Kleine-Lasthues, Chief
Operating Officer Airfreight with leading German freight
forwarder Hellmann Worldwide Logistics.  
    That means goods being transported first by sea to a port in
Dubai, from where they are moved by air freight, he said.
    "This alternative route allows customers to avoid the danger
zone in the Red Sea and the long voyage around the southern tip
of Africa," Kleine-Lasthues told Reuters.
    Many retailers, particularly in the fashion industry, had
previously changed their import planning, shifting to sea
freight as the predominant mode of transport, he said. 
    Hellman has seen increased demand for combined air and sea
routing for consumer goods like apparel as well as electronics
and tech items, he said.
    "Given the current situation, it is likely that many
shipments are stuck in containers in the Red Sea or delayed due
to diversions around the Cape of Good Hope. This delay is likely
to impact on retail operations in Europe and the Americas as it
comes as a surprise," he said.
    Tailwind Shipping Lines, a subsidiary of German discount
supermarket chain Lidl, which transports non-food goods for Lidl
as well as goods for third-party customers said it was shipping
goods around the Cape for the time being.
    "Our aim is to remain as close to our schedule as possible,"
it said.
    Some companies might opt to use air freight for especially
urgent or critical items, but the expense means it is not a
blanket solution, said Paul Brashier, Vice President of Drayage
and Intermodal for supply chain group ITS Logistics. 
    Container freight prices on the Asia to north Europe routes
have risen 14% since diversions were announced last week,
according to analysis from global freight platform Freightos. 
    "This not only incurs additional time and expense, but also
exacerbates the environmental impact through increased fuel
consumption," said Jeb Clulow, partner in law firm Reed Smith’s
transportation industry group.
    The timing of these security issues compounds difficulties
for operators as there are already disruptions through the
Panama Canal due to drought, Clulow added.
       
    ECONOMIC IMPACT    
    Some 35,000 vessels sail through the Red Sea region
annually, moving goods between Europe, the Middle East and Asia,
representing about 10% of global GDP, said Corey Ranslem, CEO of
British maritime risk advisory and security company Dryad
Global.    
    "Under an extended threat you will see the price of fuel and
goods into Europe increase substantially because of the
increased costs of diverting around Africa which can add roughly
30 days to a transit depending on the arrival port," he said. 
    If there are extended disruptions, the consumer goods sector
will face the largest impact, S&P Global said in a report. 
    Shipping companies remain in the dark over a new
international navy coalition being assembled by the United
States aimed at stablising the area.
    A Spanish fashion industry source told Reuters that shipping
lines were telling customers that a lot was riding on the
U.S.-led task force and whether it can prevent more attacks and
make the route safe again. 
    It is critical that European companies are able to use the
Suez Canal again to ensure supplies of clothes from Asia, the
industry source said. 

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
FACTBOX-Shipping firms avoid Red Sea as Houthi attacks increase 
    urn:newsml:reuters.com:*:nL1N3DE06U
FACTBOX-Suez disruption: a new inflation risk on the horizon   
 urn:newsml:reuters.com:*:nL1N3DE1BZ
FACTBOX-Houthi attacks in the Bab al-Mandab Strait hit global
trade     urn:newsml:reuters.com:*:nL8N3D05QP
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Reporting by Jonathan Saul and Helen Reid in London and Corina
Pons in Madrid; Editing by Kirsten Donovan)
 ((jonathan.saul@thomsonreuters.com; + 44 207 542 4357 ; Reuters
Messaging: jonathan.saul.thomsonreuters.com@reuters.net))