Focus: Walmart and Adidas cargo aboard, one ship's voyage to avoid the Red Sea

HD Hyundai Electric Co

31/01/2024 11:00

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      From fridges to fashion, Houthi attacks divert consumer
goods
    

        * 
      Red Sea crisis latest blow to idea of seamless global
trade
    

        * 
      Attacks prompt Walmart, others to rethink supply chains
    

        * 
      Fast-fashion particularly exposed 
    

        * 
      ASOS has turned to UK factories to cut transport times
    

  
    By Richa Naidu
       LONDON, Jan 31 (Reuters) - When the Maersk Tanjong set
sail from Thailand on Dec. 2, headed towards the Suez Canal to
reach the U.S. East Coast, it was carrying cargo for retailers
and clothing brands including Walmart  WMT.N , H&M  HMb.ST ,
Adidas  ADSGn.DE  and ASOS  ASOS.l , import and shipping data
shows.
On Dec. 17, it turned south to circumnavigate Africa's Cape of
Good Hope, after Maersk  MAERSKb.CO  paused sending vessels to
the Suez through the Red Sea, where Houthi attacks on shipping
have triggered delays, costs and uncertainty across global
consumer and retail markets.
    The diversion added thousands of miles and five days to the
Tanjong's trip to Norfolk, Virginia. The loop around Africa adds
around $1 million in extra fuel for to a trip to northern
Europe, according to LSEG data.
    Cargo ranging from raw prawns to high-end sneakers and
plastic tubes was aboard Tanjong and three other diverted
container vessels. Reuters was able to establish the containers'
contents by cross-referencing U.S. import data provided by S&P
Global Market Intelligence's Panjiva with a list of rerouted
ships provided by tracking platform ShipsGo.
    The reporting provides a glimpse of the sheer range of
products carried in some of the hundreds of thousands of
containers on more than 500 ships caught up in a crisis that
shows little sign of abating.
    Iranian-backed Houthi militants, who control much of Yemen,
have launched wave after wave of exploding drones and missiles
at Western commercial vessels in the Red Sea since Nov. 19, in
what they say is a protest against Israel's military operations
in Gaza.
    The attacks follow a series of blows to the idea of seamless
global trade, including rising protectionism, the COVID pandemic
and climate-driven drought affecting the Panama Canal. The
latest disruption could accelerate a shift towards shorter
supply chains, often called "nearshoring," five executives and
industry consultants told Reuters.
    Responding to the prospect of a months-long crisis, some
companies are already combining air, rail and sea shipping,
ordering goods earlier and using factories closer to home, the
five sources said.
    Two shipping experts said such changes could have a
long-term knock-on effect on how willing companies are to rely
on the 154-year-old Suez Canal, which suffered a total blockage
in 2021 that Maersk estimated cost $9 billion a day in lost
trade.
    Walmart  WMT.N , the world's biggest retailer, which had
products including clothes on the Tanjong, told Reuters it was
adjusting its supply chain "to help manage the recent shifts in
shipping routes" and was focused on "maintaining inventory
availability." It declined to provide details of the
adjustments.
    Even before the Houthi attacks, online fashion retailer ASOS
had over the past year been sourcing more products from Britain
and Morocco to cut transport times, the company said in response
to questions about the impact of the delays. It said the
hundreds of ASOS items coming from Asia on the Tanjong were
unlikely to have included the most urgent 'trend' items.
    Extended lead times could be factored into ASOS' purchasing
decisions in the longer term, should the attacks persist, the
company said.
       
     
    As of Jan. 17, Maersk and other shipping lines had diverted
at least 523 container ships from the Red Sea, ShipsGo data
shows, while LSEG data shows a nearly 60% drop in container
traffic in the waterway. Delays extend to more seven weeks in
some cases.
    The fast-moving and low-margin apparel industry is
particularly exposed to the Red Sea delays because spring
collections need to be in warehouses this time of year, and
summer garments should follow shortly.
    Peter Sand, chief analyst at air and ocean freight rate
benchmarking platform Xeneta, said apparel companies were
increasingly moving time sensitive cargos like the spring
fashion collection by air instead of ocean shipping to final
destinations in response to the crisis.
    In response to questions about the Tanjong and other ships,
Maersk said it was "in close dialogue with its customers
regarding the situation in the Red Sea."
    Swedish fast-fashion retailer H&M, which shipped garments on
the Tanjong, said it still didn't foresee any "significant
disruptions" in its supply chain but was "following the
situation closely." It has previously said it was increasing the
role of nearshoring "to be closer to the customer." Adidas
declined to comment.          
    50-DAY-DELAY
    Docking in Norfolk, Virginia on Jan. 19, the five-day delay
to the Tanjong was relatively short. Some container ships,
including Maersk's Londrina and San Clemente, started their
voyages in November and are now not due to dock at their final
destinations until mid-February, after delays of more than 50
days, ShipsGo data shows.
    "Losses for retail will vary by sector," said Chris Rogers,
who manages the Supply Chain Research team within S&P Global. He
flagged spoilage of food as an issue, as well as seasonal
products.
    Lars Jensen, CEO of shipping industry consultancy Vespucci
Maritime said Valentines Day shipments that arrive after Feb. 14
would render "some merchandise next to worthless."
    Jeans-maker Levi Strauss said last week in a conference call
that its operations, commercial and financial teams are "working
around the clock," and that it is seeing a 10 to 14 day increase
in transit times. The company has rerouted some products to go
through the U.S. West Coast into the East Coast.
    "If the current crisis continues through the second half of
the year, there is some risk to (costs)," Levi's CFO Harmit
Singh said, although he added that roughly 70% of Levi's ocean
freight was under three-year contracts, with the rest under
one-year contracts that shielded it from price hikes.
    Container rates for key global trade routes soared in
January, shipping industry officials and data firms say. Ocean
freight rates are set to increase further in early February,
according to data released last week by rate benchmarking
platform Xeneta.      
    The biggest increase in average short-term rates is from the
Far East into U.S. East Coast, which by Feb. 2 will cost up to
$6,119 per 40-foot equivalent unit (FEU), a measure for shipping
containers, the Xeneta data showed. This is an increase of 146%
since mid December.
    An industry source who declined to be named due to the
sensitivity of the issue said it would take months to clean up
after the Red Sea crisis is over, and predicted ripple effects
including rising prices for air freight and rail.
    The source said smaller retail and consumer goods companies
were underestimating the impact of the Red Sea attacks,
operating with a "wait-and-see" attitude, while only bigger
companies coming up with contingency plans.
    "Retailers will have to deploy tactical changes – such as
earlier shipping or use of alternative routes like rail or
trucking – if the disruptions continue until the middle of the
year," said S&P Global's Rogers. "This is very much a matter of
time."
    A source at a company that imports ingredients and raw
materials said "a multitude" of products had been affected but
that overall disruptions to the company had so far been limited.
        
    ARRAY OF GOODS
    As well as sportswear and clothes, the Tanjong carried tools
for Black & Decker  SWK.N  along with baby bottles and Egyptian
cotton sheets. Cargo on the three other ships, the Basle
Express, the APL Le Havre and the MOL Courage, which all faced
delays of just under a week, included LG fridges, Givaudan
 GIVN.S  fragrances, Estee Lauder  EL.N  cosmetics.
    Estee Lauder  EL.N , LG and Black & Decker did not respond
to requests for comment.
    Estee Lauder was shipping cosmetics, components, packaging
and bottles according to the data, while Korean manufacturer
Hyundai Electric was importing transformers, and Samsung was
moving fridge parts. Hyundai Electric and Samsung did not
respond to requests for comment.
    Procter & Gamble  PG.N  had cargo on the ships included the
raw material sodium polyacrylate, plastic tubes - and Braun
shaving products. P&G declined to comment.
    Givaudan, the world's biggest fragrances and flavours
company that sells raw materials to every large food and
consumer goods maker in the world, loaded nearly 28,000 kilos of
product onto the APL Le Havre. The ship docked on the U.S. East
Coast on Dec. 15 after its own delayed journey around Africa,
according to data from ShipsGo and ImportYeti.      
    Givaudan said potential supply chain disruptions were "a
concern," but that it had business continuity plans for its
global operations. It did not directly address the impact of the
Red Sea attacks on its business.

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Far East shipping rates to US, Europe surge     https://reut.rs/4bkJkMG
Red Sea re-routing weighs on retailers    https://reut.rs/47OfugB
Freight traffic in the Red Sea    https://tmsnrt.rs/47FvrW3
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 (Reporting by Richa Naidu. Additional reporting by Helen Reid;
Editing by Matt Scuffham and Frank Jack Daniel)
 ((richa.naidu@tr.com; Follow me on X https://twitter.com/Richa_Writes;
 +44 755 755 9587;))