CHEMICAL SPECIALIST WARNS THAT ONGOING DISRUPTION IN THE RED SEA WILL IMPACT THE PRICE OF UK GOODS

The continuing crisis in the Red Sea and the Suez Canal where Houthi rebels have been targeting ships will have a continuing impact on the price of some goods here in the UK.

Aaron Lee, who is a chemical sales specialist dealing with importing and exporting worldwide, believes the true impact of this situation is still panning out. 

“This area of conflict where the Houthis are attacking ships and there are now UK and USA airstrikes taking place, shows no sign of abating yet. This matters because this route is the fastest shipping route between Asia and Europe – almost 12 per cent of global cargo travels via this route. 

“Many shipping containers are now on ships which are taking a long – but safer and cheaper– route around Africa’s Cape of Good Hope. Coupled with this are problems with the Panama Canal where water levels are falling. The extra knock-on costs created by this mean that sooner or later the consumer will feel the impact.”

The British Chamber of Commerce has recently published a report which highlights the delays and also predicts that the prices of some goods will rise and there will be some delays in the supply of goods. 

A survey of 1,000 members which took place between January 15 and February 9 showed that over 55 per cent of those surveyed had seen their costs rise. They also confirmed there are up to four weeks of delays in goods being available to sell – or delays in components arriving on to production lines. 

“Although we have yet to see the disruption we saw during the pandemic, this conflict is and will continue to have an impact,” Aaron said. “Some companies are reporting that the cost of container hire for shipping has risen by up to 300 per cent and there’s a limit to how long any company can absorb that kind of price hike.”

Aaron pointed out that taking goods around the Cape of Good Hope is actually around ten per cent cheaper than going through the Suez Canal however there are other impacts which the general public will not be aware of:

“A round trip between Hong Kong and Felixstowe via the Suez Canal will take roughly 30 days each way. However via the Cape of Good Hope that time increases to about 100 days this then impacts sales as goods take longer to arrive. This lack of supply can often lead to price rises if demand increases.

“Another impact is that taking the Cape of Good Hope route means that India is no longer on the route so some ships are completely skipping India out altogether and not picking up goods so that has an impact for any company in the UK trading with India.”

Although the cost of a shipping container rose to astronomical levels during the pandemic – from China it rose to more than $15,000 to hire a container, it had fallen back to far less. It’s now risen to over $5,000 per container. One other big impact is insurance.

“There are very few vessels using the Suez Canal now because they are not insured to do so. Those who insure this type of transportation will not allow it because the risk of damage, loss of goods or loss of life is just too high,” Aaron warned. 

Only this week the tea company Tetley warned that its supply was being tightly squeezed. Diana Shipping has also announced it will now be using the ‘safer’ route until further notice. For more information about Aaron Lee visit https://www.alchemtrading.com