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Companies, including Ikea, warn of possible product shortages and delays due to Red Sea attacks

STOCKHOLM – Global shipping rates rose sharply and companies scrambled to avoid disruption to shipments after attacks on vessels in the Red Sea stymied traffic through the key Suez Canal trade artery.

Recent attacks by Iran-aligned Yemeni Houthi militant group on vessels forced leading shipping companies such as Maersk to reroute around the Cape of Good Hope to avoid the Suez Canal, the shortest shipping route between Europe and Asia.

The attacks have stirred memories of 2021 when container ship Ever Given ran aground in the canal, blocking dozens of container ships for six days.

The current disruption has caused container shipping costs to rise sharply, but those rates are still far below peak pandemic levels.

Electrolux, the world’s largest appliance company, has set up a task force to find alternative routes or identify priority deliveries, while Inter Ikea has warned of potential product shortages.

As at Dec 19, the price to ship a container from China to the Mediterranean was US$2,413 (S$3,207), having surged 44 per cent in December because of the disruptions, after hitting a low of $1,371 earlier in 2023, said Mr Eytan Buchman, chief marketing officer at Freightos, a booking and payments platform for international freight.

However, that rate still falls far short of the pandemic era high in January 2022 of US$14,158, when shipments of goods were delayed by months due to lack of available container vessels.

With worldwide economic demand softening, particularly in China, ship owners have not been able to fill ships with containers.

Electrolux said late on Dec 18 that it expects any effect on deliveries will be limited.

The Swedish group has worked with shipping companies such as Maersk and CMA.

In a statement on Dec 19, global home furnishing brand Inter Ikea said it is looking at alternative transportation options to the canal, a key route for the budget furniture maker.

“The situation in the Suez Canal will result in delays and may cause availability constraints for certain Ikea products,” it said.

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The Suez Canal accounts for about 12 per cent of the world’s shipping traffic.

US Defence Secretary Lloyd Austin said on Dec 19 that the United States is leading a multinational operation to safeguard commerce in the Red Sea.

Extra US$1 million

The longer journey will cost up to US$1 million extra in fuel for every round trip between Asia and Northern Europe, according to estimates from freight platform Xeneta.

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Retailers and manufacturers are likely to pass on the higher costs to consumers, potentially boosting inflation during a prolonged cost-of-living crisis.

“This is a cost that will ultimately be passed on to consumers who are buying the goods,” said Xeneta chief analyst Peter Sand.

Travelling via southern Africa will add about 10 days on to a journey from Asia to North Europe and the East Mediterranean, experts said.

It typically takes about 27 days to sail from Shanghai in China to the Dutch port of Rotterdam.

On Dec 18, US fertiliser company Mosaic said it had rerouted a couple of US-bound shipments around the Cape of Good Hope.

Dairy giant Danone said most of its shipments had been diverted, increasing transit times.

Should the situation continue beyond two to three months, the group will activate mitigation plans, including using alternative routes via sea or road wherever possible, a spokesperson said.

Walmart, the largest US importer via container ships, declined comment.

Delays to shipments will not affect Christmas holiday shopping, but there is the potential for shops to run low on stock by February if the delays continue, supply chain research firm Project44 said in a note on Dec 19.

“After the peak shopping season through the holidays, it is possible that inventories will be depleted,” it said. REUTERS

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