Red Sea shipping crisis drives prices up

• Houthis launch missiles
• Shipping lines avoid route
• Costs are up

Attacks in the lower Red Sea by Houthi militants based in Yemen have resulted in a sharp rise in shipping costs. 

While regional importers are unlikely to see any immediate impact over the holiday period, shortages and supply chain issues will start to take hold in February, an industry expert has said.

“We can expect a temporary spike in the prices of products travelling through the Red Sea,” said Dnyanada Kulkarni, senior research analyst at Century Financial.

“But because [the supply chain disruption] has triggered a rebound in the oil prices that have declined steadily for seven weeks, that benefits the GCC region.”

• Jet fuel most exposed to Red Sea closure, analysts say

Freight costs, fuel prices and insurance costs have gone up since mid-November in response to the attacks on commercial shipping vessels.

However, the disruption is not as grave as the supply chain crisis during the peak of Covid-19.

“The freight costs between China and the Mediterranean is up at $2400,” Kulkarni said.

“This is a far cry from the $14,000 levels we saw during the pandemic. So we haven’t reached the level where companies will start crumbling just yet.”

For a full breakdown of the increases in costs and to understand the long-term impact of the Red Sea attacks, watch the full video above.