After the Red Sea attacks, European retailers and manufacturers are facing a chaotic period

Logistics experts warn that attacks on ships in the Red Sea could disrupt supply chains and create chaos for Europe’s retailers and manufacturers.

Since Yemen’s Houthi militants, backed by Iran, increased attacks last month on vessels transiting through the Gulf of Aden or southern Red Sea.

This shift affects mainly sailings between Asia & Europe. It adds up to two extra weeks to the usual 35-day journey and creates long gaps in the arrival of ships into European ports.

Simon Heaney said that the shipping industry’s customers were “definitely in pain” as a consequence.

He said that “in this interim period it appears to be a bit chaotic”, but he did expect shipping lines would establish a “new and more reliable network” “in a relatively short time”.

Container lines that handle the movement of manufactured goods or components offer a service once a week mainly on their most popular routes.

Some car makers’ production lines have been halted due to delayed arrival of parts. The delays will likely deplete retailers’ inventory, and shipping companies may face surcharges to recover the costs.

Carlos Tavares, chief executive of Jeep and Peugeot owner Stellantis, said he expected the delays to push up shipping costs further for carmakers.
He said: “I am sure that the logistics companies will use the fact that we are using these ships for a longer period of time to negotiate on the price.”

Nils Haupt, Hapag-Lloyd’s spokesperson in Hamburg, stated that there may also be congestion in European ports due to vessels arriving outside of scheduled times.

Haupt stated that “we had eight Hapag-Lloyd ships at Hamburg this week. That’s a lot.”

Some ships continue to travel through the Suez Canal. Analysts say that while Beijing is neutral about the Houthi attacks, the disruption in shipping rates has affected Chinese companies. China is a major trading partner of Europe, and this route is vital to China. called on “all parties” to “ensure safety of navigation in Red Sea”.

CMA CGM of France, the third largest container shipping company in the world, , saidthat it had rerouted some ships around Africa. However, others were still sent through the Canal when they received French warships as escorts.

Rodolphe Saade is the owner and chairman of CMA CGM, a company based in Marseille. He said that the CMA CGM schedules are being affected by reroutings, delays while waiting for the Red Sea passage, and port congestion.

Saade added that the group is trying to assist companies with planning by providing constant updates on arrival time.

“You’re supposed [to arrive] at a port, but you have windows.” . . But now, our schedules have become a mess and we are unable to adhere to the timings,” said he.

Tesla in Germany and Volvo Cars in Belgium, as well as Suzuki in Hungary, have all halted certain production lines.

Auto industry is especially vulnerable due to its “just-in-time” manufacturing processes. There are no large stockpiles. The issues have become less serious due to a slight rise in stock levels in the last few years since the disruption.
Volkswagen, a German manufacturer, said that it has been receiving parts from Asia in Europe via the longer route for about a month now. Volkswagen said that the longer route had increased costs, but prevented the production problems which had affected other manufacturers.

Volkswagen stated that “almost all major shipping companies have already begun rerouting ships since December.” This will ensure that the freight reaches its final destination, even if it is a little late.

Danone, the French food company, said that it would implement “mitigation” plans, including using alternatives like air freight, in the event the Red Sea disruption lasts for longer than two to three months.

Pepco Group warned that higher freight costs were causing slower deliveries and increased freight costs in retail. The company owns Poundland and operates 3,500 discount clothing stores throughout Europe.

The report also noted that the shipping companies were adding surcharges to cargo deliveries in order to cover the additional costs. It warned that “a long-term issue in the area could impact the supply in the next months”.

Retailers are less vulnerable than companies that rely on just-in time delivery because they order general merchandise, such as clothing, months in advance.

Lord Simon Wolfson is the chief executive officer of clothing retailer Next. He said that the new route was an “inconvenience, not a crise”. He said the group had plenty in stock both in warehouses and stores.

Simon Geale is the executive vice-president for procurement at the consultancy Proxima. He said that while some retailers might choose air freight as a way to avoid delays, this was likely an option only for those who had profit margins large enough to cover the additional costs.

He said that retailers could start ordering products from Asia sooner.

Nichola Mallon is the head of Trade for Logistics UK. She said that her members expected to have to wait two weeks before they could place orders, until the canal disruptions were resolved.

She also complained of the surcharges many shipping companies impose on their customers to cover costs incurred by diversion. She pointed out that lines were saving money on certain costs, like Suez Canal fees by taking a longer route.

Mallon said that he hoped the service patterns of shipping lines would “stabilise”, as arrivals through Cape Town settled into a more regular pattern.

Shipping customers will have to deal with the unpredictability of the supply chain until then. Drewry’s Heaney explained that “there’s pain because you have to wait longer and there’s uncertainty as to when your goods will arrive.”