Exporters explore air freight options as Red Sea chaos deepens

LONDON/MADRID — Exporters are scrambling to find ways to get key consumer goods to buyers including by air as a wave of attacks in the Red Sea adds to ocean freight supply chain problems elsewhere.

Iran-backed Houthi militants in Yemen have stepped up attacks on vessels in the Red Sea since Nov. 19 to show support for Hamas as Israel’s military offensive in Gaza continues.

The attacks have disrupted a key trade route that links Europe and North America with Asia via the Suez Canal and pushed container shipping costs sharply higher as companies seek to move their goods via alternative, often longer, routes.

Companies are now trying to switch to so-called intermodal transport to maintain global supply chains, which involves a combined sea and air route, said Jan Kleine-Lasthues, Chief Operating Officer Airfreight with leading German freight forwarder Hellmann Worldwide Logistics.

That means goods being transported first by sea to a port in Dubai, from where they are moved by air freight, he said.

“This alternative route allows customers to avoid the danger zone in the Red Sea and the long voyage around the southern tip of Africa,” Kleine-Lasthues told Reuters.

Many retailers, particularly in the fashion industry, had previously changed their import planning, shifting to sea freight as the predominant mode of transport, he said.

Hellman has seen increased demand for combined air and sea routing for consumer goods like apparel as well as electronics and tech items, he said.

“Given the current situation, it is likely that many shipments are stuck in containers in the Red Sea or delayed due to diversions around the Cape of Good Hope. This delay is likely to impact on retail operations in Europe and the Americas as it comes as a surprise,” he said.

Tailwind Shipping Lines, a subsidiary of German discount supermarket chain Lidl, which transports non-food goods for Lidl as well as goods for third-party customers said it was shipping goods around the Cape for the time being.

“Our aim is to remain as close to our schedule as possible,” it said.

Some companies might opt to use air freight for especially urgent or critical items, but the expense means it is not a blanket solution, said Paul Brashier, Vice President of Drayage and Intermodal for supply chain group ITS Logistics.

Container freight prices on the Asia to north Europe routes have risen 14% since diversions were announced last week, according to analysis from global freight platform Freightos.

“This not only incurs additional time and expense, but also exacerbates the environmental impact through increased fuel consumption,” said Jeb Clulow, partner in law firm Reed Smith’s transportation industry group.

The timing of these security issues compounds difficulties for operators as there are already disruptions through the Panama Canal due to drought, Clulow added.

ECONOMIC IMPACT
Some 35,000 vessels sail through the Red Sea region annually, moving goods between Europe, the Middle East and Asia, representing about 10% of global GDP, said Corey Ranslem, CEO of British maritime risk advisory and security company Dryad Global.

“Under an extended threat you will see the price of fuel and goods into Europe increase substantially because of the increased costs of diverting around Africa which can add roughly 30 days to a transit depending on the arrival port,” he said.

If there are extended disruptions, the consumer goods sector will face the largest impact, S&P Global said in a report.

Shipping companies remain in the dark over a new international navy coalition being assembled by the United States aimed at stablizing the area.

A Spanish fashion industry source told Reuters that shipping lines were telling customers that a lot was riding on the U.S.-led task force and whether it can prevent more attacks and make the route safe again.

It is critical that European companies are able to use the Suez Canal again to ensure supplies of clothes from Asia, the industry source said. — Reuters