Supply bottlenecks by the Houthi rebels: what you now have to wait longer for “I do not intend to respond to the demand”: Crypto miracle defends itself against seizure

What happened?

Since mid-November, Yemen’s Iran-backed Houthi rebels have repeatedly attacked ships in the Red Sea traveling on the Suez Canal trade route linked to Israel. The Houthis feel they belong to the self-proclaimed ‘Axis of Resistance’ – an Iranian-backed network targeting Israel and the West.

The militia attacks have had a huge impact on trade between Asia and Europe. According to UN representative Jan Hoffmann, trade volume through the Suez Canal has fallen by 42 percent in the past two months.

The number of container ships transiting the Suez Canal each week has fallen by 67 percent compared to the previous year, Hoffmann said. Oil transit fell by 18 percent.

Why is the Suez Canal so important?

The Suez Canal is a central trade route for world trade, through which approximately 20,000 ships pass annually. The alternative is to drive around the southern tip of Africa, which is a huge detour. This could delay the journey of the container ships by one to two weeks. In addition, the alternative route results in additional fuel costs amounting to hundreds of thousands of euros.

However, due to attacks by the Houthi rebels, some shipping companies are now forced to avoid the route through the Suez Canal and take the detour via Africa. As a result, the goods on the ships are not delivered on time and bottlenecks arise in trade.

In which sector are there the biggest bottlenecks?

It is not possible to say in general which industry is most affected by the current situation in the Suez Canal, as countless different goods are transported via this trade route. But there are a few industries that are sounding the alarm:

Car industry

Automakers Tesla and Volvo have announced they will pause production for a few days due to supply chain constraints. According to Volvo, the gearbox is lacking to continue producing cars.

Chinese car manufacturer Geely also says that the alternative trade route is causing delays in deliveries to Europe.

Energy market

Crude oil and liquefied natural gas (LNG) are also transported via the sea route. According to commodity analyst Thu Lan Nguyen of Commerzbank, five percent of global crude oil shipments go via the Suez Canal, she told the ARD financial editors. This is “not irrelevant, but not absolutely essential either.”

The sea route is more important for the gas market than for crude oil, because Europe is dependent on the import of liquefied gas, which comes from the Middle East, among other places. According to Thu Lan Nguyen, there are few alternatives and that is why European gas prices have reacted more strongly than crude oil prices.

Furniture

The furniture chains Ikea, Mömax and XXXLutz also informed their customers about possible shortages. In addition to classic furniture, certain individual parts and fronts are also temporarily unavailable.

other industries

For example, further shortages could arise in fashion items, toys and household items. Hobby items such as brushes or canvases may also be less available for some time.

Another area where end customers face bottlenecks is electronics. This is what trade expert from the Kiel Institute for the World Economy, Vincent Stamer, predicts to the financial editors of ARF. Overall, he expects “no disruptions like two years ago” – regardless of sector.

The problem is that the shipping companies now have to spend more money because they have significantly higher costs due to the longer route. 'It's a lot of money. “But that doesn't mean it will necessarily reach end users on a large scale,” says Stamer.

Compared to the blockade in 2021: what is different this time?

In the spring of 2021, the container ship 'Ever Given' caused a blockage of the Suez Canal for almost a week. Hundreds of ships were at both ends of the canal, causing delivery delays around the world.

At the time it involved a sudden blockade caused by one ship. Because the blockade was unforeseeable, it was not possible for the waiting ships to make the detour via the Cape of Good Hope for fuel reasons. At the same time, the blockade was expected to clear quite quickly.

The current situation is different: the Houthi rebels' attacks are part of a larger conflict and are intended to put pressure on Israel and the world. Because the attacks have been going on since November, it is impossible to predict when the Suez Canal will be safe to navigate again.

What's next?

Although the US and Britain struck targets in Yemen in mid-January in a joint military operation to repel Houthi militia attacks on ships in the Suez Canal, there is currently no end to the conflict in sight. It will depend, among other things, on what measures the Western community of states, led by the US, will take against the attacks.

However, affected companies can plan and adapt the new route, even if this means that transport becomes more expensive and delivery delays occur. This time, the supply will not be completely interrupted, as was the case during the pandemic.

However, there is still a catch, because the alternative route around Africa is not entirely safe: “It is quite possible that piracy off the coast of Somalia will increase again if trade flows shift so dramatically,” estimates Ilja Bäumler, logistics expert at the Lucerne University of Applied Sciences, reported the situation to the “Luzerner Zeitung”. In the short term, the diversion is the right step, but in the long term the risks should not be underestimated.

(hkl, with material from sda)