Supply chain under pressure amid shipping attack fears

There are growing concerns over the impact of the ongoing attacks in the Red Sea on the global supply chain after major shipping firms have revealed they are telling their vessels not to transit the area.

Hapag-Lloyd and Maersk have joined the likes of MSC, and CMA CGM who have told their vessels to pause any attempts to operate in the area in and around the Red Sea until further notice amid ongoing attacks by Houthi rebels operating out of Yemen. Evergreen has suspended import and export operations from Israel and halted vessels transiting the Suez canal.

Yesterday oil giant bp announced it was also stopping its shipping operations via the Suez Canal

Given the role the Suez Canal plays in some of the world’s most vital shipping lanes there are serious concerns that vital goods will fail to arrive in Europe on time for the Christmas and new year period.

Other shipping lines have diverted their vessels away from the area and have sent them via Cape of Good Hope in South Africa, which has  extended the journey times and costs.

It has been exacerbated by warnings from the Institute of Export & International Trade (IOE&IT) that the UK faces a wine shortage in January which will also signal a  new era of threats to the European supply chain from new taxation and tariff rules.

Iranian-backed Houthis attacked a Hapag-Lloyd containership, on Friday causing a major fire  ablaze during a series of missile attacks against box ships crossing the Red Sea on Friday. The Maersk Gibraltar was also targeted, with a missile just missing it while it was transiting near to Yemen.

“Following the near-miss incident involving Maersk Gibraltar yesterday and yet another attack on a container vessel today, we have instructed all Maersk vessels in the area bound to pass through the Bab al-Mandab Strait to pause their journey until further notice,” a Maersk spokesperson told Reuters on Friday.

Meanwhile, Hapag-Lloyd  issued a to announce it was halting all container ship traffic across the Red Sea.

The International Chamber of Shipping (ICS) has issued a new statement branding the attacks as “deplorable”, adding that some owners are now unwilling to risk the lives of their crew and the safety of their vessels.

The ICS stated: “Bahamas flagged Galaxy Leader, operated by Japanese company NYK, and owned by British Company Ray Car Carriers was seized by Houthi forces on 19 November. Subsequently there have been an increasing number of attacks against merchant ships.

“ICS deplores the actions of the Houthis in the strongest terms and calls for the immediate cessation of these attacks. These are unacceptable acts of aggression which threaten the lives of innocent seafarers and the safety of merchant shipping.

The ICS said: “These attacks are a flagrant breach of international law. States with influence in the region should, as a matter of urgency, work to stop the actions of the Houthis in attacking seafarers and merchant ships, and de-escalate what is now an extremely serious threat to international trade.”

Around 12% of the world’s trade transits the Suez canal, there for any disruption is a significant threat to the supply chain.

Elsewhere there have been warnings that UK consumers face a potential shortage of wine in January due to supply chain disruptions caused by ongoing problems at the Panama Canal. It comes as trade experts have issued a further warning over fresh concerns that new rules coming into force on 31s January 2024 will also risk imports of wine, beer and spirits from the EU.

The IOE&IT has warned that, while goods leaving the UK for the EU are already subject to checks, the new Border Target Operating Model (BTOM) will impose new checks on certain EU imports to the UK, including food and drink products, for the first time since Brexit.

Alcoholic products, as well as food products such as eggs, dairy and meat, will be subject to new border checks. The UK is the second largest wine importer in the world, with the majority of imports coming from France, as well as Italy and Spain – with a total combined value of just under $2.94bn.

But BTOM rules could stifle the flow of wine. Since the UK left the EU, British winemakers, brewers and distillers have struggled to export goods into the European market, due to increased customs checks on their products.

According to IOE&IT, EU businesses looking to export alcohol to the UK will have to go through strict customs controls and use a new electronic system (Customs Declaration System or CDS) to make their declarations.

The hit to wine supplies from the EU would come at a time when similar imports from the Americas are threatened by shipping delays caused by drought in the Panama Canal. UK favourites such as Californian Chardonnay and Chilean Merlot make their way via international shipping routes affected by reduced use of the canal.

Marco Forgione, director general at IOE&IT, said: “The shipping delays through the Panama Canal, which are impacting South America and [the] west coast [of the] US have come at a doubly unfortunate time. Not only do they threaten alcohol supplies during the peak festive season, but they’re happening weeks before new rules could impact imports from the EU.

“While business in the UK are getting used to checks on products going to the EU, the checks BTOM introduces for EU goods coming the other way will be new. These procedures will take time to bed in, so there’s a risk we’ll see disruption to supplies of our favourite drinks and other food. This could lead to gaps in supermarket shelves. We need to make sure UK and EU businesses are fully aware of what is coming.

“2024 will be a pivotal year for international trade, with over 20 major new measures coming into force that will impact the UK and our overseas trading partners. This raft of changes will usher in much-needed changes, including the digitalisation of trade and cutting of red tape, ultimately making international trade easier and more lucrative.”