Houthi attacks on cargo ships in the Red Sea have impacted the supply chain through the most important trade routes, reports Just Food. The crisis has compelled many industries to re-evaluate their logistics.
The Red Sea and Suez Canal are responsible for roughly 12 percent of global trade, and almost 33 percent of container traffic. The new route that ships are forced to take adds approximately 3,500 extra nautical miles, increasing travel time by as much as two weeks, according to the report. The increased timeline could cause stocking issues or lead to product spoilage.
A spokesperson from dairy cooperative FrieslandCampina explained some of the operational challenges posed by the conflict.
“Confronted with the recent disruptions in the Red Sea and Gulf of Aden, our carrier partners have largely chosen to re-route shipments via the Cape of Good Hope to its destinations. This adds ten to 15 days of transit time depending on the destination. Both finished goods and incoming material flows have been impacted.
“Transit via the Cape of Good Hope is more expensive compared to the Suez route. Longer transit times require more fuel and decrease available capacity. We are working with our carrier partners to ensure the continuity of our operations. The cost per container could potentially increase by 30 to 70 percent, resulting in a range of up to $3,000 per container, depending on the destination.”
The extent of the immediate effect on food prices is unknown. In a statement from Ken Murphy, the CEO of Tesco, the UK’s largest supermarket group, he posited how the change in route could push up prices at retail.
“If they [cargo ships] do have to go the whole way around Africa to get to Europe, it extends shipping times, it constrains shipping space and it drives up shipping costs. So that could drive inflation on some items, but we just don’t know," he said.
Increased volumes of U.S. grain have already had to take longer routes to Asia, noted ING. Italian farmers’ organization Coldiretti also said that its exports of fruit to Asia have been affected. Full Story
Related: Targeted Strike Escalates Shipment Conflict in Red Sea; International Conflicts May Equate to Higher U.S. Prices