Red Sea attacks: ‘Our shipping costs have jumped 250%’
“Some of our costs have gone up 250%”.
That is the reality for Thomas O’Brien, boss of family-run Boxer Gifts, which designs games and seasonal presents.
Their products are made in China so the Leeds-based firm relies heavily on global shipping. But attacks on commercial vessels in the Red Sea have prompted long diversions to avoid one of the world’s busiest shipping lanes.
Mr O’Brien is among business owners who have told the BBC this could lead to delays and price rises.
Chief executive Helen Dickinson said this was “as a result of higher transportation and shipping insurance costs”.
Guy Platten, secretary general of the International Chamber of Shipping warned “we won’t see much of an impact until later on in January”.
The attacks are being carried out by the Houthi group which has declared support for Hamas and has said it was targeting ships travelling to Israel. It is not clear if all the ships that have been attacked were actually heading to Israel.
Because of this and the threat of future assaults, several of the world’s largest shipping firms, including Mediterranean Shipping Company and Maersk, have diverted vessels away to a much longer route around Africa’s Cape of Good Hope and then up the west side of the continent.
Mr O’Brien said this had led to shipping companies increasing their container costs. For Boxer Gifts that has amounted to a 250% increase in shipping rates in the past two weeks, he said.
The company said it would continue to absorb rising costs as much as possible, but if that prices rose further, the cost would have to be passed on. Delays are a problem too.
“You end up with a two or three week delay. We’ve got Valentine’s Day products that are likely to be delayed and miss Valentine’s Day.
“The same effect is going to be felt on Mother’s Day meaning a huge chunk of our selling time for these games is missed”.
The German shipping giant Hapag-Lloyd told the BBC it would continue to avoid the Red Sea route until at least 9 January. It sends an average of 50 ships a month through the Suez Canal. Some 25 ships were diverted in the last half of December and 15-20 more will be impacted by today’s decision.
MSC and Maersk two of the largest shipping lines in the world have paused journeys through the Red Sea until further notice. While, France’s CMA-CGM is increasing its rates between Asia and the Mediterranean.
While there has been some disruption to supply chains already, Mr Platten, from the International Chamber of Shipping said it would take a few weeks before the problems are really noticed.
For Mr O’Brien, the financial hit of the ongoing disruption could be hundreds of thousands of pounds, but he said his main concern is letting customers down.
“That damage your reputation for a lot longer than the short term pain of some money,” he said.
Nightmare
Rachael Waring’s furniture business has been hit with disruption too.
A container filled with her imported products was due to pass through the Red Sea before Christmas. Instead, it has been diverted around the Cape of Africa, along with many other cargo ships.
“I’ve got customers that most of the goods on one of the container was destined for, which is a nightmare because they won’t have furniture,” she said.
“It has a knock on effect for cash flow because that furniture has been paid for in advance, whereas I should be delivering and invoicing the customer now I can’t for another month”.
Ms Waring said the cost of paying for a container have trebled, and she expected prices to rise further.
“That increased shipment cost has to be taken into account for creating customers going forward. And that obviously is going to cause problems for inflation,” she added.
Peter Sand, chief analyst at the Copenhagen-based shipping analytics platform Xeneta, said: “One extra million dollars of fuel costs is put on top of every voyage that goods around the Cape of Good Hope instead of Suez Canal.”
But he said the increased charges shouldn’t become fixed after the threat of attack on ships has subsided.
“Everyone needs to have their costs covered from an escalation, but they can’t become embedded,” he said.
