Every reporter: Zheng Yuhang Every editor: Lan Suying
Recently, a number of merchant ships have been attacked by Yemen's Houthi rebels in the Red Sea waters in recent days, which has exacerbated tensions in the Middle East and affected international shipping.
On December 18, BP announced that it would suspend all oil shipments through the Red Sea due to the deteriorating security situation in the Red Sea, becoming the first international oil major to take a stand. On the news, the price of Brent crude oil, the international benchmark, jumped 2.8% during the day, and European natural gas futures also soared nearly 8% at one point.
Previously, a number of shipping giants, including MSC, Maersk, CMA CGM and Hapag-Lloyd, have also announced the suspension of sailing in the Red Sea. These four companies have a cumulative share of 53% of the global container shipping market. In other words, more than half of international shipping no longer passes through the Red Sea.
On December 19, local time, U.S. Secretary of Defense Austin announced in Bahrain that the United States is forming a new multinational force to protect ships transiting the Red Sea from the threat of attacks by drones and ballistic missiles launched in Houthi-controlled areas of Yemen.
In this regard, Zhang Chuchu, deputy director of the Center for Middle East Studies at Fudan University, and Wang Yongzhong, director of the International Commodity Research Office of the Institute of World Economics and Politics of the Chinese Academy of Social Sciences, said in an interview with the "Daily Economic News" reporter that the increase in freight rates and delays in the delivery of goods caused by the obstruction of the Red Sea-Suez Canal channel will be transmitted to the global supply chain and push commodity prices higher. More importantly, after the United States strongly intervenes in the Red Sea situation, the Red Sea crisis may further spill over, even to the Persian Gulf region.
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How important is the Red Sea-Suez corridor?
According to Xinhua News Agency, since the outbreak of the new round of Palestinian-Israeli conflict, the Houthis have frequently launched missile and drone attacks on Israel on the grounds of "supporting Palestine", and have continuously attacked ships "associated with Israel" in the Red Sea.
Zhang Chuchu said in an interview with the "Daily Economic News" reporter that the route through the Bab el-Mandeb Strait, the Red Sea, and the Suez Canal is one of the busiest maritime transport routes in the world. As security risks across the Red Sea continue to rise, the cost of insurance for ships passing through the Suez Canal and the Red Sea has increased significantly. Today's major shipping companies around the world are either choosing to take on high premiums and the risk of crossing the Red Sea, or they are rerouted to other routes, such as the Cape of Good Hope, and endure additional sailing cycles. Whatever choice is made, it will lead to higher freight rates and delays in the delivery of goods, and the increase in costs will be passed on throughout the supply chain.
The Red Sea is located at the junction of two continents, Asia and Africa, connecting the Arabian Sea and the Indian Ocean through the Bab el-Mandeb Strait in the south and the Mediterranean Sea and the Atlantic Ocean in the north through the Suez Canal. The Red Sea is the only way to transport through the Suez Canal, which has two major shipping arteries in the north and south of the Red Sea, namely the Suez Canal and the Bab el-Mandeb Strait. It is reported that the Suez Canal handles about 12% of the world's cargo transportation, 30% of container trade and nearly 10% of crude oil trade through more than 1 trillion US dollars of cargo every year.
Egypt's Suez Canal Authority said 55 ships had abandoned the canal and diverted around South Africa's Cape of Good Hope since Nov. 19, though more than 2,000 ships still crossed the canal during the same period.
But detouring the Cape of Good Hope in South Africa, the first thing that increases is the cost of transportation. Taking the electric vehicle transportation industry as an example, German media reported that in view of the heightened tensions in the Red Sea, Tesla electric vehicles have chosen an alternative route for sea transportation from China to Europe, that is, a detour to the Cape of Good Hope. It is reported that with the extension of the route, the transportation cost of electric vehicles will increase by about 20%. At the same time, the detour also means that the voyage is extended and the turnover efficiency of the ship is reduced, which squeezes the container capacity in stages. On December 20, the main contract of the container transportation index (European line) rose by more than 8.00% during the day, and is now at 1149.0 points.
Moreover, as one of the world's most important oil and liquefied natural gas transportation routes, the situation in the Red Sea has a significant impact on the global energy market.
Zhang Chuchu told reporters that data from the U.S. Energy Information Administration showed that in the first half of 2023, the total volume of oil transportation through the Red Sea route accounted for about 12% of the total volume of oil in seaborne trade, and the volume of LNG transportation accounted for 8% of global LNG trade. Therefore, the blockage of the main shipping artery in the Red Sea may have a huge impact on international oil prices and natural gas prices.
Not only that, Zhang Chuchu said that the price of agricultural products such as palm oil and grains that are transported by container ships and involve the Suez Canal on mainstream routes are also likely to rise.
Wang Yongzhong explained to reporters that for energy companies, if they do not take the Red Sea-Suez Canal route, then they need to bypass the Cape of Good Hope in Africa, and the additional cost of each ship will increase by 40,000 US dollars, and the transportation time will be extended by 7~10 days. If the Red Sea crisis intensifies, it will inevitably cause other shipping lanes to begin to congest, the pressure on the global supply chain will also rise sharply, and Europe, as an economic center, will have a relatively large impact on energy prices in the future.
And apart from detouring the Cape of Good Hope, is there a better alternative in terms of international trade routes?
Zhang Chuchu told the "Daily Economic News" reporter that in the current situation that the Red Sea-Suez Canal channel is blocked, all parties should actively lay out diversified shipping routes. As the uncontrollable factors of the Red Sea route increase, the importance of other modes of transport is doubly highlighted. Taking China-Europe logistics as an example, China-Europe freight trains and air cargo flights connecting Eurasia may play a more important role.
However, Wang Yongzhong told reporters that theoretically speaking, the obstruction of shipping routes can be compensated by increasing land trains, such as connecting Europe and Asia through the Eurasian railway, the advantage is that the speed is fast, but the disadvantage is also obvious, the cost of land transportation is higher than the cost of shipping, for coal, grain and other bulk commodities with low value, if the freight becomes higher, the overall price of the commodity will also become significantly higher.
The United States "entered" or escalated the Red Sea crisis
At a time when the situation in the Red Sea is becoming tense, on December 19, local time, US Secretary of Defense Austin announced a major decision in Bahrain, the Middle East headquarters of the US Navy, - a joint fleet will be formed to patrol the Red Sea.
According to CCTV News, in response to the so-called "escort alliance" formed by the United States and some countries, Mohammed Abdul Salam, a spokesman for Yemen's Houthi rebels, responded on social media: "The United States formed an alliance to protect Israel and militarize the waters of the Red Sea. Those who seek to widen the conflict must bear the consequences. ”
Mohammed al-Buhaiti, a member of the core decision-making body of the Houthis in Yemen, also said on the 19th that even if the United States succeeds in mobilizing the whole world, the Houthis will not stop their military operations. Bouheti reiterated that the Houthis will stop their attacks only if Israel ceases fire and allows unhindered humanitarian supplies to enter the Gaza Strip.
Zhang Chuchu told the "Daily Economic News" reporter that the United States' intervention in the Red Sea situation may bring greater risks to the region. "On the one hand, the high-profile actions of the Houthis in Yemen and the blockage of shipping through the Red Sea-Suez Canal mean that the spillover effects of the Israeli-Palestinian conflict are growing. On the other hand, the U.S. Secretary of Defense announced that a new multinational force is being formed to carry out escort operations in the Red Sea, which is likely to exacerbate the already complex political situation in Yemen and pose the risk of further escalation of 'regional proxy wars'. ”
Wang Yongzhong also said in an interview with reporters that the Red Sea crisis was caused by the Palestinian-Israeli conflict and is part of the impact of the further expansion of the Palestinian-Israeli conflict. If the Israeli-Palestinian conflict is not properly resolved, not only the Red Sea-Suez Canal region, but also the trade routes of the Persian Gulf will be affected.
"The international community needs to promote peace talks, promote a ceasefire and cease the fighting between Palestine and Israel, urge all parties to abide by international law and international humanitarian law, and make efforts to implement the 'two-state solution', so as to fundamentally resolve the cycle of the Palestinian-Israeli conflict." At the same time, all parties should refrain from adding fuel to the fire and resuming the conflict in Yemen, and jointly promote the de-escalation of the situation in the Red Sea. Zhang Chuchu finally concluded to reporters.
National Business Daily