Higher shipping costs loom as Red Sea route suspended

The suspension of Red Sea routes by major shipping lines because of the continued attacks of Iran-backed Houthi rebels in Yemen is expected to result in higher shipping rates and delay the trade of goods which may affect exporters from ecozones, the Philippine Economic Zone Authority (PEZA) said yesterday.

“The closure and shutdown of the Red Sea to trade will make shipping costs 15 percent more expensive and add 10 days for the exchange of goods between Europe and Asia,” PEZA director-general Tereso Panga told reporters in a Viber message.

“It will definitely affect global trade, delaying production and deliveries of products and resources, thereby increasing the cost of goods,” he warned.

Panga said this could result in higher inflation in different parts of the world.

Several major shipping lines have suspended their Red Sea routes, a key international shipping route, amid the continued attacks of Houthi rebels on commercial vessels.

As a result, major shipping firms have rerouted their vessels via the Cape of Good Hope, adding at least 10 days of sailing and extra costs at they navigate the southern tip of Africa.

The rebel group has launched a growing number of strikes on vessels in the Red Sea since the Israel-Gaza war erupted in October last year.

“We have yet to feel the effects in the Philippines but we are pro-actively working together with other concerned agencies to derisk global supply chains that may affect our locators in particular and the whole economy in general,” Panga said.

The PEZA chief said the agency is collaborating with the affected registered business enterprises that are importing and exporting to and from Europe and the Mediterranean to ensure that the least possible effects would be felt as contingencies are set in place in anticipation of any major conflict.

According to earlier news reports, World Trade Organization director-general Ngozi OkonjoIweala said they are less optimistic about global trade this year amid the Red Sea tensions.’

The WTO earlier forecasted global merchandise trade volumes to grow by 3.3 percent this year.

Okonjo-Iweala said they will be revising those estimates as they expect a weaker performance this year.