The Red Sea Event , Continually Impact Global Trade In 2024

Recently, Yemen's Houthis said they would ban Israeli-flagged vessels wholly or partly owned by Israeli individuals and entities from entering the Red Sea, Gulf of Aden and Arabian Sea.

                                                                                 (From CCTV News)

At the same time, the Houthis will also prohibit the navigation of ships owned by American and British individuals or entities, or ships flying their flags.

This means that Yemen's Houthi armed forces are expanding their range of activities, now extending from the Red Sea and the Gulf of Aden to the Arabian Sea.The Red Sea is one of the important shipping channels connecting Asia and Europe, and many grain and industrial products are transported through this waterway.

From the end of 2023 to the present, the disruption of shipping in the Red Sea has had a sustained impact on global trade and supply chains.The disruption of the Red Sea will first affect freight costs for consumer goods. In the supply chain, logistics, security, insurance, escort and other costs will rise significantly.

According to an estimate by Oxford Economics, the average retail value of a container is about $300,000. Since December 2023, the cost per container shipped from Asia to Europe has risen by about $4,000.This suggests that if the full cost were passed on, the average price of goods inside a container would rise by 1.3%. These losses could pile up and be borne by consumers, producers and shippers around the world.

In addition to container ships, car carriers have also been greatly impacted. According to Clarkson data, as of mid-January, the number of container ships entering the Suez Canal was down 82 percent from the average for the first half of December 2023, and the number of car ships was down 46 percent.

Due to rising tensions in the Red Sea, the number of car vessels crossing the Red Sea has plummeted from nearly 90 per month to zero on January 23, 2024, and all major shipping lines passing through this area have diverted to the Cape of Good Hope.

Gram Car Carriers (GCC), a leading Norwegian car carrier, said, "The Houthi attack on commercial vessels has resulted in the first time in 30 years that a single vehicle carrier has crossed the Red Sea."

Unlike other shipping markets, about 80 percent of car-shipping operators' business is bound by long-term contracts, so they can only sail around the Cape of Good Hope to avoid the loss of facing the Red Sea crisis head-on.

It is a time of uncertainty and adjustment for both the automotive and automotive shipping industries.

In the face of tensions in the Red Sea, many European automakers are facing multiple pressures on production, delivery and costs. For them, it is increasingly urgent to establish a more complete parts supply chain in Europe and reduce dependence on Asia.On the other hand, Chinese automakers have rapidly increased their exports to Europe in recent years, especially as electric vehicles have pushed up car-carrier rentals.

Even before the Red Sea crisis, the daily rent for a transoceanic car carrier had soared to $105,000, up from $16,000 two years earlier. If the conflict in the Red Sea cannot be alleviated for the time being, then Chinese car carriers may also face higher transportation costs.

In this regard, a number of domestic car companies began to layout the shipping industry. Among them, BYD's first car ro-ro transport ship Trailblazer 1 made its maiden voyage on January 15, 2024, entered the Atlantic Ocean through the Cape of Good Hope on February 6, and successfully arrived at the port of Vlissingen in the Netherlands on February 21.

As the Red Sea crisis drags on and spreads, disruptions to the global maritime supply chain will continue to increase.