Red Sea Impacts Supply Chains Across The Globe

15 Feb Red Sea Impacts Supply Chains Across The Globe

Recent attacks by Yemen-based Houthi forces on commercial ships in the region, followed by retaliatory strikes by U.S. and British warplanes, ships and submarines on Houthi bases, have raised concerns about widening conflicts in the region.

As a result, shipping lines are diverting  a growing number of vessels  from the Red Sea region, traditionally one of the world’s busiest trade routes, and sending them to their destinations via other channels (such as around the southern tip of Africa rather than via the Suez Canal), leading to a spike in freight rates.

Container shipping rates for key global trade routes have soared, pushing ocean freight rates up, as container ships divert more than $200 billion of goods away from the Red Sea waterway, as fears rise of a prolonged disruption to global trade in what is one of the world’s busiest routes.

These volatility-driven rate rises are subsequent to, and further compound, the impact of the general rate increases (GRIs) that ocean carriers announced prior to the commencement of the new calendar year.

Furthermore, the longer this crisis lasts, the more disruption there will be to ocean freight shipping across the globe, resulting in increasing volatility and costs, potentially triggering a global supply chain crisis.

As a result of this tenuous situation the Federal Maritime Commission (FMC) has announced an informal public hearing focussing on the impact of conditions in the Red Sea and Gulf of Aden regions on commercial shipping and global supply chains. This hearing aims to provide a platform for supply chain stakeholders to share their experiences and strategies, enabling the Commission to  collect relevant information on new and related issues subject to FMC statutes, such as implementing contingency fees and surcharges.

The team at Transolve Global are closely monitoring this ongoing situation to help ensure shipments have as close to zero or minimal impact as possible. If you require further information, please do not hesitate to contact your local Transolve representative.

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