A spate of militant attacks on vessels transporting cargo through the Red Sea — one of the world’s most used trade routes — is already starting to take a toll on global commerce.
Shippers are currently moving around 200,000 containers via the Red Sea per day, down from some 500,000 in November, German economic centre IfW Kiel institute has found.
That has meant a decline in global trade of 1.3% from November to December 2023. Iran-backed Houthi militants stepped up attacks on shipping vessels last month to show support for Palestinians in the Gaza war.
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The Houthis have vowed to attack ships linked to Israel or bound for Israeli ports, but many of the targeted ships have had no links to Israel.
The attacks impact a route vital to East-West trade, especially of oil, as ships access the Suez Canal via the Red Sea.
Diversions in response to the attacks have led to journeys between Asian production centres and European consumers taking up to 20 days longer, said Julian Hinz, director of the IfW Kiel’s trade policy research centre.
“This is also reflected in the declining trade figures for Germany and the EU, as transported goods are now still at sea and have not already been unloaded in the harbours as planned,” Hinz said in a statement.
China bucks trend
By region, the IfW Kiel’s trade indicator for December showed exports from and imports to the European union down by 2% and 3.1%, respectively. The United States saw a 1.5% drop in exports and a 1% drop in imports, even as the Red Sea trade route is less crucial for that country.
China’s trade bucked the trend, meanwhile, with exports up 1.3% and imports up 3.1%. The institute said this was likely down to the upcoming Chinese New Year.
Another factor likely at play is the close ties between the Xi Jinping government and US sanctioned-Tehran.
China currently accounts for most of Iran’s oil exports with volumes hitting record highs in recent months. That has meant that Chinese shippers face the lowest risk of Houthi attacks.
On the other hand, shipping giants such as Maersk and Hapag-Lloyd have been sending their vessels on longer, more expensive journeys around South Africa’s Cape of Good Hope.
Maersk has diverted all container vessels from Red Sea routes for the foreseeable future, warning customers to prepare for significant disruption.
South Korea pledges help for exporters
South Korea, meanwhile, has pledged to support to its vital export sector by securing additional freight space on ships and storage areas.
“With the spread of conflicts in the Middle East, we cannot rule out possibilities of similar disruptions in other regions of the Middle East,” Vice Oceans Minister Song Myeong-dal said in a statement issued on Wednesday.
The ministry said it intended to preemptively secure freight space at shipping firms to minimise the impact of Red Sea tensions on South Korea’s exports and imports.
It would provide alternative ships for car exports and additional storage yards, since the auto sector is expected to face the biggest disruption, Song said.
South Korea aimed to secure the use of four container ships for North European and Mediterranean routes in the period running from mid-January to early February, the ministry said.
- Reuters, with additional inputs from Vishakha Saxena
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