The blockade imposed on the Red Sea portends further price increases

The blockade imposed on the Red Sea portends further price increases

There are no notches in this multi-domain diagnosis. The Red Sea crisis has already begun to be felt a few days ago in Spanish companies specializing in trade; In addition, its impact is soon also beginning to be felt on the end customer especially in the fields of textile, electronics and automobiles; But he has learned everything that the pandemic, the ship stuck in the Suez Canal, and the war in Ukraine almost completely eliminate the possibility of a stock collapse like the one we witnessed then.

“The sectors that could be most affected have worked hard to put in place contingency plans to respond to this type of problem,” says a senior source in the distribution sector. “The industry has learned from previous situations,” agrees a second voice related to the automotive industry. “There has been a series of critical events that have made companies more prepared – and they now have larger safety stocks,” said a third transportation analyst.

Delays in deliveries

None of them hide that the time it takes for some goods to arrive from Asia has now increased from 5 to 21 days, that the price they pay for it is much higher, and that if this situation continues for much longer, there will be no other alternative. The option of passing it on to the final price. Although there is not currently excessive concern, there is some fear of what could happen if this crisis worsens.

At its core, the problem dates back to late last year, when Yemen's Houthi movement began attacking and hijacking ships in the Red Sea, ostensibly targeting vessels linked in some way to Israel. The point is that although this is one of the main routes for international trade (carrying 40% of traffic between Asia and Europe), most shipping companies decide to choose alternative routes, as a precaution.

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Longer routes

“To get to Europe, they are now using a longer route, up to South Africa and up around Africa to the Iberian Peninsula, and this has greatly disrupted the plans of all companies in terms of the supply chain, because before the goods arrived after a while, and now there are delays,” “This has a big economic impact, because it is a longer route, and it involves more fuel consumption,” says Javier Jasso, transportation director at the Association of Consumer Goods Manufacturers and Distributors Association of Ecoc. He points out. “There has been a huge increase in the prices of marine charters.”

Jasso talks about a 60% increase in prices in the past three weeks alone, in addition to the concerns of insurance companies to cover some goods or the fact that companies, facing the slightest risk of product shortages, decided to increase prices. Preemptively manage the size of their orders, maximizing ship capacity. The credit insurance company Crédito y Caución talks about a 300% increase in the cost of sea transportation.

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