Attacks continue while retailers increase stock volumes

The latest reported attack occurred recently when the crew of a UK-registered cargo ship abandoned the vessel after it was hit by a missile. No injuries were reported. Soon after, Houthi militia also claimed responsibility for a strike targeting an MSC-controlled bulk carrier crossing the gulf, with no reports of significant damage or injuries resulting from the incident.

Legal consequences are also emerging regarding the rights carriers can claim in war-risk circumstances. Many carriers have turned to Force Majeure to terminate or modify contracts, while other contracts include an express provision allowing vessel owners to cancel or terminate transits should there be a risk of war or related activity. As mentioned in our 18th December update, insurance premiums are directly impacted as a consequence and have been on the rise since then.

Economic consequences continue to significantly impact shippers who rely on spot rates, Despite the sharp increase in spot rates, contract pricing has remained stable, while carriers such as Hapag-Lloyd have introduced peak season surcharges from the end of January. However, long-term rate trends will be subject to demand, despite adjustments in capacity occurring in the next months. A general 0.5% increase in inflation is also expected in the long run if the crisis persists.

Furthermore, retailers have begun increasing the volume of their backup stocks to avoid product shortages and are starting to adapt to their shipments taking longer due to rerouting around Africa, which seems to be the new supply chain normality.

As the Red Sea Crisis persists, we deliver regular updates on its impact across global supply chains, commerce, and consumers. Should you have any questions or concerns about your shipments, please reach out to us via enquiries@woodlandgroup.com.