Gulf retailers absorb Red Sea shipping cost rise – for now

January 9, 2024

The Red Sea shipping crisis is only a “hiccup” in the day-to-day operations of UAE retailers, and customers will not experience any price rises or product shortages in the short term, chains are saying.

“We wouldn’t call it a crisis. This particular situation isn’t much different to the challenges we had when the Suez Canal was blocked [in March 2021],” said Tom Harvey, general manager, commercial at the supermarket giant Spinneys.

Currently, 37 percent of Spinneys products come from Europe, which makes the Red Sea an important channel for the retailer. But Harvey said that they do not expect any significant shortages as it had already switched to air freight.

“Yes, there is an increased cost in air freight. But the customer did not see that last time and we don’t expect there to be any increases for the customers now in just the same way,” he said.

However, international trade bodies are expecting problems with both inflation and product availability in coming weeks.

Marco Forgione, director general of the Institute of Export and International Trade, said: “Five to 10 percent [inflation] is what we are anticipating for some products in the next few weeks.

“About 30 percent of global container shipping goes through the Red Sea, so we will see some inflationary pressure on products and also on input costs for manufacturing.

“So we will only begin to see the impact of what’s happening now in a couple of weeks’ time as it feeds through.”

Are alternate transport modes such as rail and air freight the ideal supply chain solution for the long term? Watch the full video to find out.