US-UK strikes escalate Red Sea chaos, threaten supply chains

By Al Mayadeen English
Source: Bloomberg
18 Jan 2024 18:38

The aggression carried out by the US and the UK on Yemeni positions in the Red Sea have raised concerns of a prolonged supply-chain crisis.

Members of the Yemeni Coast Guard (AFP)

The aggressions carried out by the US and UK against the Yemeni resistance in the Red Sea have further intensified chaos within the shipping industry, a report by Bloomberg pointed out. The matter is of significant concern as it involves increases the risk of a prolonged supply-chain crisis.

Wednesday witnessed the third consecutive day of a commodity carrier being targeted, this time by a drone. Senior officials in the shipping industry confidentially acknowledged that numerous crew members are now apprehensive about the prospect of navigating through the Red Sea.

It is important to note that Wednesday's operation was targeting a ship that was bound for "Israel". The crew had reportedly ignored the resistance's calls and warning messages, Yemeni authorities specified.

Following the US and UK's shift from an aggressive stance, known as Operation Prosperity Guardian, to launching airstrikes at Yemeni positions along the Yemeni coastline, Western navies issued advice for ships to maintain a safe distance. This recommendation was openly adhered to by the owners and operators of at least 2,300 merchant vessels, and certain insurers responded by imposing restrictions on coverage.

The result has been sharp declines in shipments through a waterway that would normally handle about 12% of global seaborne trade. Flows of oil, gas, grains, and manufactured goods have increasingly been diverted. Even a livestock carrier appeared to detour, raising animal welfare concerns.

"It’s a very uncertain time, and I think all of us are waiting to see the overall impact of the ongoing Operation Prosperity Guardian, and also the most recent strikes," said John Stawpert, a senior manager for trade and environment at the International Chamber of Shipping, which represents owners of about 80% of the global shipping fleet. "The potential impact of these attacks is horrendous" for crews.

The insurance expenses for ships whose crews dare to navigate the waterway have surged tenfold, with a visible spike observed since the airstrikes. Some underwriters are going to the extent of attempting to exclude vessels from the US, UK, and "Israel" from coverage. Meanwhile, container shipping and oil freight rates are beginning to rise.

The anxious crews, the precarious safety situation, interrupted transits, delayed deliveries, and fluctuating freight markets have reignited discussions about inflationary pressures, pricier oil, and concerns about supply chain disruptions that could disrupt the global economy.

On Tuesday, US National Security Council spokesman John Kirby remarked that it was "too soon" to determine the full impact of the strikes. However, he noted a "good effect" in terms of disrupting and degrading the Yemenis' capacity to carry out military offensive operations.

Situated at the southern end of the Red Sea, the Bab el-Mandeb, which serves as an entry point for freighters utilizing the Suez Canal to traverse between Asia or the Middle East and Europe, is approximately 20 miles wide at its narrowest point, spanning from Yemen on one side to Djibouti on the other.

It is important to note that two days ago, the Yemeni Foreign Ministry reiterated that maritime transport was safe for ships that are not affiliated with "Israel," and that operations targeting ships in the Red Sea are solely "limited to ships owned by the Israeli enemy or those heading to the ports of occupied Palestine."

"What several shipping companies declare by suspending their operations, citing increased risks in the Red Sea, is a result of American pressures and exaggerations. It is an inaccurate stance that aligns only with the biased American propaganda," the head of the Sanaa negotiating delegation Mohammed Abdulsalam said in a post on X.

"Hundreds of ships continue to pass through the Bab el-Mandeb strait daily. We reaffirm that there is no restriction on any ship except those associated with the criminal Zionist enemy or those heading to its ports in the occupied Palestine," he added.

Supply chain disruptions

This disruption is having a ripple effect on raw materials and consumer goods throughout the entire supply chain. The chaos has led to disruptions in the transportation of oil from countries such as Iraq and Saudi Arabia. At least six million barrels of crude from Iraq, a major supplier to Europe through the Bab el-Mandeb, have been redirected.

As many vessels opt for the extended route around Africa, providers of ship fuel are noting increased demand in African and Middle Eastern locations.

In the gas market, suppliers have largely ceased using the Suez Canal, a necessary passage for ships navigating through the Red Sea to travel between Europe and Asia.

Recent tracking data indicates that at least five LNG carriers, including some linked to export projects in Russia, have reversed course away from the waterway, redirecting towards the Atlantic. Among them, two were carrying gas for Asian customers.

Qatar has altered the course of four LNG shipments this week that were originally bound for the Red Sea, choosing instead to reach Europe via the lengthier route around the southern tip of Africa, as per tracking data.

Japan's leading shipping lines have temporarily halted transits, and other companies, including Torm, Stena Bulk, and Hafnia, have also declared their intention to avoid the area. This comes after the Galaxy Leader, a ship owned by an Israeli billionaire and operated by Japan was targeted by the Yemeni resistance in November. This adds to the numerous container lines and vessel owners that had already diverted hundreds of ships prior to the airstrikes.

Up until last week, bulk ships responsible for transporting commodities like grain, coal, and metals had experienced relatively minor disruptions. However, a growing number of these vessels are now also steering clear of the route.

In the past three weeks alone, ships carrying approximately 1.6 million tons of grain and initially bound for the Suez Canal have been redirected to alternative routes, as reported by Kpler analyst Ishan Bhanu. The majority of these shipments consist of crops destined for consumers in China and Southeast Asia.