The ongoing Red Sea crisis is causing many businesses to rethink their logistics routes. Some shippers have even looked for an alternative – airfreight. The British Chamber of Commerce (BCC) has released a report on the scale of the disruptions caused by the crisis.
Research for the report was conducted by the organization’s Insight Unit. Almost 37% of companies surveyed in the report say they have been impacted by the Red Sea crisis.
Locate2u has been closely monitoring the situation in the region.
Companies hit in waves by Red Sea delays
The Red Sea is a crucial corridor connecting the Mediterranean Sea, Indian Ocean and beyond. Its strategic location gives shippers access to Europe, Asia, and Africa. The Red Sea route is the natural sailing passage between these regions.
The impact on business had been massive, with some shipping lines having to suspend routes and re-route vessel sailings to accommodate customers. To keep business moving, shipping companies have chosen to divert shipments around the Cape of Good Hope.
Respondents say increased costs have been an issue. Some have experienced costs increasing by as much as 300% due to delays. This is coupled by adding an extra three to four weeks to delivery times.
Cost pressure may build
William Bain, head of trade policy at the BCC says the new research has given the organization immediate insight into the impact of Red Sea disruption on UK businesses. “There has been spare capacity in the shipping freight industry to respond to the difficulties, which has bought us some time. And recent Office for National Statistics (ONS) data also indicates the impact has yet to filter through to the UK economy, with inflation holding steady in January,” he says.
In January, we saw companies opting for airfreight to mitigate the effects of the crisis. But Bain gives insight into something that could be worrying – if the situation worsens. “But our research suggests that the longer the current situation persists, the more likely it is that the cost pressures will start to build,” he says.
Supply chain resilience
Here’s a scenario: A manufacturing company may be waiting for parts to continue work on the production line. But the Red Sea situation has put all your machines on halt as you wait for these critical parts to be shipped in.
The World Economic Forum (WEF) in a blog post emphasizes how the shipping industry adapts to this crisis. “The Suez Canal and the Red Sea channel approximately 30% of the world’s container traffic and facilitate the annual movement of merchandise valued at over $1 trillion,” the blog reads.
This figure may just give you the scale of this situation – and what logistics and shipping companies feel. “This recalibration of shipping routes exacerbates the issue of capacity within the ocean freight sector, as vessels now require extended durations to complete round trips and prepare for subsequent cargo loads.”
Companies like US mass retailer Target have experienced disruptions in supply due to shipment delays. The WEF pinpoints an important point – supply chain resilience.
“The Red Sea crisis has highlighted the critical need for resilience within global supply chains. To navigate this turbulent landscape, companies must excel in real-time monitoring of global events, grasp the implications of these developments and rapidly deploy alternative operational strategies.”
Now Read: Trade turbulence: Costs surge as shipping giants avoid Red Sea
About the author
Sharl is a qualified journalist. He has over 10 years’ experience in the media industry, including positions as an editor of a magazine and Business Editor of a daily newspaper. Sharl also has experience in logistics specifically operations, where he worked with global food aid organisations distributing food into Africa. Sharl enjoys writing business stories and human interest pieces.
