Adidas’ boss warned of “exploding global freight rates” after Houthi rebels attacked in the Red Sea, causing delays to shipping and increasing costs.
A survey shows that UK manufacturers are experiencing growing supply chain problems as the Red Sea Crisis has led to the rerouting raw materials, components, and other goods from the Suez Canal.
According to S&P Global’s monthly survey, the UK manufacturing sector continued to decline in 2024. Output and new orders declined further, resulting in more job losses, cuts in purchases and stock, and increased job loss.
The purchasing managers’ indicator was 47.0 in January. This is up from 46.2 in the previous month, but still below the earlier estimate of 47.3. Any reading below fifty indicates contraction, while any reading above 50 points to expansion.
According to the Houthi rebels in Yemen, who are allied with Iran, they have attacked ships as a response to Israel’s bombing of Gaza. Israel is responding to an attack by Hamas on the 7th of October. Hamas controls Gaza. US and UK airstrikes have been launched against the Houthi Rebels.
Some manufacturers said that 12 to 18 extra days might be needed to deliver certain products, which would disrupt their production schedules. This could also increase inflationary pressures during a period when businesses were facing a weak domestic and international demand.
Bjorn Gulden is the CEO of Adidas. The largest sportswear company in Europe, Adidas, has said that shipping disruptions will affect profit margins. He said that “exploding freight rates” were driving costs up and shipping delays are causing some delivery issues.
Gulden stated: “The spot rate is exploding once again. If you don’t hold a contract for a long time or ship more than you agreed to, you will be charged a higher price.
There is currently a three-week delay, which causes delivery problems in Europe.
Maersk, Hapag-Lloyd and other top shipping companies diverted ships away from the Suez Canal to reroute them around the southern tip Africa. This added thousands of miles and delayed the arrival of goods and components made in Asia, such as clothing and shoes, in Europe.
Rob Dobson of S&P Global Market Intelligence said that the Red Sea Crisis is complicating cost and stock management. The Red Sea crisis is complicating cost and stock management initiatives.
Suez canal handles 12% of the global trade and half of it is containerized goods. The Suez canal is also used to ship oil from the Persian Gulf into Europe and North America. Houthi rebels’ continued attacks on container ships has pushed crude oil prices up.
The Institute for Supply Management released its latest manufacturing survey on Thursday. It showed that supplier delivery times had rebounded at their highest level for more than a month, and the prices paid index reached a nine-month peak.
The overall manufacturing index rose to 49.1 from 47.1 in December, indicating that the decline in the sector is fading.