Houthi Attacks spark economic paralyses

The Red Sea and Suez Canal have become increasingly important in the past two years not just for ships that take goods between Asia and Europe, but also for oil and liquified natural gas cargos.

Now, hundreds of ships are avoiding the Suez Canal and sailing an extra 4,000 miles around Africa, burning fuel, inflating costs and adding 10 days of travel or more in each direction.

They are avoiding one of the world’s most important shipping routes, the Red Sea, where for months the Iranian-backed Houthi militia has attacked ships with drones and missiles from positions in Yemen.

The turmoil has been sweeping. About 150 ships passed through the Suez Canal, which lies at the northwest end of the Red Sea, during the first two weeks of this January. 

That was down from over 400 at the same time last year, according to Marine Traffic, a maritime data platform. Those detours, and the Houthi attacks, have persisted despite airstrikes by the United States and its allies against the Houthis.

Shipping companies have tripled the prices they charge to take a container from Asia to Europe, partly to cover the extra cost of sailing around Africa. Shipowners that still use the Red Sea, mainly tanker owners, face rising insurance premiums.

Container rates have not yet risen as much as they did during the coronavirus pandemic. But retailers like Ikea have warned that avoiding the Suez Canal could delay the arrival of merchandise at stores. Some car factories in Europe have had to briefly suspend operations while they wait for parts from Asia.

This could worsen inflation. JPMorgan Chase estimated on Thursday that worldwide consumer prices for goods would climb an extra 0.7 percent in the first half of this year if shipping disruptions continue.