Red Sea Shipping Attacks to Hit Chinese Export Profits
Miao Qi
DATE:  Dec 20 2023
/ SOURCE:  Yicai
Red Sea Shipping Attacks to Hit Chinese Export Profits Red Sea Shipping Attacks to Hit Chinese Export Profits

(Yicai) Dec. 20 -- Worsening attacks on merchant ships in the Red Sea are driving up shipping costs as container vessels are forced to avoid the Suez Canal and take the longer Cape route, hurting the profits of Chinese exporters in the process.

The higher cost of shipping goods destined for North Africa around the southern tip of the continent cannot be fully passed on to customers right now, Ding Yandong, general manager of Ningbo-based Rollmax Shutter Component, told Yicai.

About 10 percent of global trade travels through the Suez Canal, but shipping giants Maersk, Hapag-Lloyd, Mediterranean Shipping, and CMA CGM have stopped using it as Iranian-backed Houthi rebels in Yemen have been attacking commercial vessels in the Red Sea and the Bab al-Mandab Strait since October.

They have escalated the attacks recently, demanding an end to Israel's offensive in the Gaza Strip and the delivery of food and medicine supplies to the enclave.

As a result, shipping quotations for early January are expected to climb, Wang Zhi, marketing director at Shenzhen-based Baosen Suntop Logistics, told Yicai.

Clients could postpone orders due to the higher charges or, in the worst-case scenario, scrap them altogether if the situation deteriorates, Ding said. The GM is preparing to cut prices for customers in North Africa by 1.5 percentage point, leading to an about 20 percent drop in the manufacturer's net profit.

Exporters have to choose between added risk or longer routes, but either way the costs are higher. The Joint War Committee, a non-government body that comprises underwriting representatives from both the Lloyd’s and IUA company markets, has widened the area at risk in the Red Sea so shippers’ insurance costs will also rise, further driving up shipping charges, according to the editor-in-chief of a shipping consulting platform.

An executive at a Zhejiang province-based freight forwarder said ocean cargo rates for goods headed to the United States are on the rise due to the Red Sea situation adding to the issue of low water levels in the Panama Canal. Rates are up about 20 percent and still rising, he said.

Editors: Shi Yi, Emmi Laine

Follow Yicai Global on
Keywords:   The Red Sea,China,exports,foreign trade,Suez Canal,logistics,Isreal-Hamas,shipping