Red Sea cargo chaos to trigger ANOTHER wave of inflation here

‘It’s only a matter of time’ before prices shoot up at checkouts, says freight boss

ANOTHER surge in inflation is on the way after vital cargo ships in the Red Sea were targeted by Houthi rebels in support of Hamas’s three-month long war with Israel.

As Houthi rebels, who support Hamas, continue to target ships making their way through the Red Sea to the Suez Canal, some ships have decided to avoid the area, choosing to divert to Africa’s Cape of Good Hope instead.

In the past few days, both the British and the Americans have bombed sites in Yemen where they believe Houthi rebels are based, adding to uncertainty in the region.

Simon McKeever, chief of the Irish Exporters Association (IEA), said it was ‘only a matter

‘Not just an attack on Israel’

of time’ before they expected clients to raise concerns, adding: ‘There were 500,000 tonnes of cargo going through the Red Sea in November, and that has dropped to 200,000.’

John Stawpert of the International Chamber of Shipping, which represents around 80% of the world’s merchant fleet, said: ‘Originally they [the Houthis] said they were targeting Israeli-linked vessels. Since then the attacks have been much more sporadic. We’ve seen figures that, in the last 50 attacks, only one of the vessels had any link to Israel. This really is an attack against the global [companies], not just Israel any more.’

He said of the US and UK attacks: ‘This is very, very important action they are taking in protecting the sea lanes. We are seeing successful interventions since we saw the starting of Operation Prosperity Guardian.

We haven’t seen any successful hits by ships lately.’

Redirecting cargo ships around South Africa can add up to €1million to the cost and ten days to freight journey times .

Mr Stawpert said: ‘It’s not the entire fleet which has diverted. It’s largely the big container lines. It will increase prices at the supermarket checkouts but I don’t think we will see the doomsday scenarios being predicted in some of the media.’

IBEC’s retail expert Arnold Dillon said reports from supermarkets and smaller retailers show the impact has been ‘minimal’ so far.

‘Many source their products from the domestic and EU markets. For retailers reliant on the Asian markets and Far East, they are looking at contingency plans such as air and rail travel.’

He said if the situation continues ‘prices will see significant increases due to transportation, which will affect retail’, adding: ‘This is an evolving situation.’

Economists fear interest rate cuts may be delayed and even increase further if the situation does not de-escalate soon.

The typical journey time from Shanghai to Rotterdam is usually 28 to 30 days but travelling around the Cape of Good Hope adds eight to 10 days and cost millions of euros more.

Mr McKeever said things were going from ‘bad to worse’ in the Panama Canal where, because of climate change, there is no longer enough water for barges to pass.

‘This means you will see an increase in rates and you’re going to have an accumulating delay,’ he said. ‘I don’t have any customers going “What is going on here?”, but it’s only going to be a matter of time.’

Ireland is at the end point of the supply chain, with most goods landing in Rotterdam, before travelling to Liverpool and then to Dublin.

‘It is something to be concerned about... if it feeds into inflation. Freight will slow down. It is going to get more expensive... it will be a slow creep during the year.’

He said the shipping chaos would ‘inevitably’ mean a ‘price increase’ and ‘delays’.

‘I went into Christmas thinking things are going to slow down quite a bit during the year. My sense is, from chatting to companies before Christmas, they were battening down the hatches.’

‘Things are going from bad to worse’