What do Houthi attacks in the Red Sea mean for global trade?

"Our costs have increased by 250%!” This is the cold reality that Thomas O’Brien, the owner of the British family business Boxer Gifts, is facing now.

Boxer Gifts is a company that designs games and seasonal gifts. The products they design are manufactured in China, so the Leeds, UK-based company relies heavily on global shipping.

But with frequent attacks on commercial ships passing through the Red Sea over the past month or so, ships have had to spend longer rerouting to avoid one of the world's busiest shipping lanes. Everything the company is hearing right now seems to be bad news.

Many European business owners such as O'Brien said in interviews with the media that this (Red Sea crisis) will inevitably lead to transportation delays and price increases.

Previously, the British Retail Consortium had warned that disruptions to shipping could have a knock-on effect on product supply and prices. Helen Dickinson, chief executive of the British Retail Consortium, said this was a result of rising transport and transport insurance costs. In the coming months, transit times for some shipments will be significantly extended.

In fact, the current situation is not even the worst. According to an earlier warning from Guy Platten, Secretary General of the International Chamber of Shipping, the real impact may not be fully felt until later in January.

At present, the source of the crisis in the Red Sea is still the Houthi organization in Yemen. The organization has announced its support for Hamas and said that its attacks target ships heading to Israel through the Red Sea. However, it was not immediately clear whether all the ships attacked were bound for Israel.

Due to frequent threats of attacks, several of the world's largest shipping companies, including Mediterranean Shipping Company and Maersk, have abandoned their traditional route through the Suez Canal and instead diverted ships around the Cape of Good Hope in Africa, and then around the west side of the continent. Sailing to Europe. O’Brien said this has led to these shipping companies raising container freight rates. For Boxer Gifts, shipping costs have increased by 250% in the past two weeks.

The company said it would continue to absorb rising costs as much as possible, but would have to pass on costs if freight rates rise further. Additionally, merchandise delays are becoming an issue.

O'Brien pointed out, "We have almost become accustomed to the on-time arrival of goods in the post-epidemic era, but currently due to the Red Sea crisis, another 10 to 14 days have to be added to the shipping time. Ultimately this may cause a delay of up to 2 days in the shipment of goods. Three weeks. Our Valentine's Day products are likely to face delays and miss the Valentine's Day sales period. Mother's Day may also be affected in the same way, which means we will miss a large number of prime sales windows."

German shipping giant Hapag-Lloyd previously stated that it would continue to avoid the Red Sea route until at least January 9. The company previously had an average of 50 ships passing through the Suez Canal each month. In the second half of December, about 25 ships had already been rerouted, and the current decision is expected to affect at least 15-20 more ships.

Mediterranean Shipping Company and Maersk, two of the world's largest shipping companies, have also suspended routes through the Red Sea until further notice. France's CMA CGM has announced that starting from January 15, container freight rates from Asia to the Mediterranean will be increased by up to 100% compared to January 1.

For O’Brien, the financial losses caused by continued interruptions may be as high as hundreds of thousands of pounds, and his biggest concern is not even just a matter of money – he is more anxious that delays in shipments may disappoint customers.

"The damage to your reputation lasts much longer than the short-term monetary loss," he said.

Rachael Waring runs a furniture trading business, and her business has been severely affected recently - a container filled with the company's imported products was supposed to pass through the Red Sea before Christmas. However, like many other cargo ships, it ended up being diverted. Travel to the Cape of Good Hope.

"I've had some clients where most of the goods on a container were going to them and it's been a nightmare, they can't get it," she said. "It's going to have an impact on cash flow because the furniture The payment for the goods has been paid in advance, and I was supposed to deliver the goods and issue an invoice to the customer, but now I have to wait another month.

Waring said the cost of paying for a container had tripled in recent times and she expected prices to rise further.

"For customers, increased shipping costs have to be taken into account in the future. This obviously creates new problems with inflation," she added.