The promotional products industry should expect more disruption to the supply chain due to chaos in the Red Sea.

Over the past month, Yemen’s Houthi rebels have been attacking merchant ships near the Bab-el-Mandeb Strait, an integral part of the maritime trade route between the Mediterranean Sea and the Indian Ocean via the Red Sea and the Suez Canal.

  • The Houthis claim the attacks are revenge against Israel for its military campaign in Gaza, CNN reported.

As a result of the onslaught, several container shipping lines and tanker owners have stopped transit in the Red Sea and are rerouting around the Cape of Good Hope, leading to an additional $1 million in extra fuel costs and delays of up to seven to 10 days for each voyage, Bloomberg reported.

Importance Of The Suez Canal

The Suez Canal, which facilitates the transportation of fuel and products from Asia and the Middle East to Europe and the United States, has been “Plan B” for many shipping companies since the Panama Canal has faced restrictions due to an ongoing drought.

  • Roughly 12% of world trade goes through the Suez Canal, and about 5% goes through the Panama Canal, according to The New York Times.

Since the summer, vessel capacity on all-water shipments from Asia to the East Coast along the Panama Canal has been reduced – some as much as 40% – in order to avoid hitting the bottom with water levels so low.

  • Starting in January, the number of vessels permitted to pass through the system daily will increase from 22 to 24, officials announced last week.

Nonetheless, if shipping companies choose to bypass the canals and sail via the Cape of Good Hope, promo firms can expect to foot a much larger bill and wait at least a week longer for their products.

“The [Suez Canal and Panama Canal] are fundamental to the flow of international trade,” Marco Forgione, director general at the Institute of Export & International Trade, told Bloomberg. “Without them operating smoothly, the domino effect of damage and disruption to supply chains caused by ships delayed and in the wrong places will be substantial.”

 
Contingency Plan

Maersk, the world’s second-largest shipping line, announced that for all future vessels planned to sail through the hostile area, a case-by-case assessment will take place to determine whether adjustments need to be made.

“We have faith that a solution enabling a return to using the Suez Canal and transiting through the Red Sea and Gulf of Aden will be introduced in the near future, but at this time, it remains difficult to determine exactly when this will be,” Maersk said in a statement. “As such, getting vessels moving via the Cape of Good Hope will ultimately be a faster and more predictable outcome for customers and their supply chains.”

“We understand the impact this may have on your logistics operations,” the company added, “but please rest assured that all decisions have been carefully considered by our teams and only implemented in the name of safety.”

Military Intervention

On Monday, U.S. Secretary of Defense Lloyd Austin announced the launch of Operation Prosperity Guardian, a multi-national security initiative focused on the Red Sea.

  • The initiative includes the U.S., United Kingdom, Bahrain, Canada, France, Italy, Netherlands, Norway, Seychelles and Spain.

As part of Operation Prosperity Guardian, military ships will be positioned to provide umbrella protection to as many commercial vessels as possible at a given time, an anonymous senior military official told The Associated Press.

“The recent escalation in reckless Houthi attacks originating from Yemen threatens the free flow of commerce, endangers innocent mariners and violates international law,” Austin said. “The Red Sea is a critical waterway that has been essential to freedom of navigation and a major commercial corridor that facilitates international trade.”

“Countries that seek to uphold the foundational principle of freedom of navigation must come together to tackle the challenge posed by this non-state actor launching ballistic missiles and uncrewed aerial vehicles (UAVs) at merchant vessels from many nations lawfully transiting international waters,” Austin said.