Houthi rebel attacks on Red Sea shipping routes send shockwaves through global trade

BP stated Monday that it has 'decided to temporarily pause all transits through the Red Sea,' including shipments of oil, liquid natural gas and other energy supplies.

Houthi rebel attacks on Red Sea shipping routes send shockwaves through global trade
Royal Navy/Ministry of Defence via AP
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The assaults by Yemen's Houthi rebels on commercial ships in the Red Sea have intimidated several leading global shipping firms and oil corporations. This has led to a diversion of international trade from this vital passage, essential for the transport of consumer goods and energy resources. Such a shift is anticipated to cause delays and an increase in prices.

BP stated Monday that it has “decided to temporarily pause all transits through the Red Sea,” including shipments of oil, liquid natural gas and other energy supplies. Referring to the action as a "precautionary pause," the oil and gas company based in London stated that while the decision is subject to continuous reassessment, the safety of their crew remains the foremost concern, MSN reports.

In addition to vital energy resources being transported to Europe and other regions via tankers, food items such as palm oil and grain, along with the majority of the world's manufactured goods, are shipped in containers. Many of these container ships navigate through the Suez Canal.

“This is a problem for Europe. It’s a problem for Asia,” remarked John Stawpert, the Senior Manager for Environment and Trade at the International Chamber of Shipping, an organization that represents 80% of the global commercial fleet.

He pointed out that typically, 40% of trade between Asia and Europe passes through this waterway, emphasizing that it could have a significant economic impact.

Simon Heaney, Senior Manager of Container Research at Drewry, a maritime research consultancy, stated that since MSC, Maersk, CMA CGM Group, and Hapag-Lloyd are key players in alliances transporting most consumer goods between Asia and Europe, “virtually all services will have to make this rerouting." This detour will lead ships around Africa's Cape of Good Hope, potentially extending their travel time by a week to ten days or more, as some analysts suggest.

Heaney explained that companies will face a decision: either deploy additional ships to compensate for the extended travel time or increase fuel consumption for the longer journey. If they choose to accelerate to maintain their schedules, either approach could result in higher emissions of climate-affecting carbon dioxide.

“The impact will be longer transit times, more fuel spent, more ships required, potential disruption and delays — at least in the first arrivals in Europe,” he said, adding that shipments may arrive to ports "in clumps," but costs should not rise to pandemic levels.

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