The continued Houthi attacks have affected global supply chains (Anadolu Agency)
The historical importance of the Red Sea as a vital sea corridor linking Europe and Asia is facing a turbulent chapter with continued tensions as a result of attacks by the Houthi group in Yemen on ships linked to Israel, which later expanded to include American and British ships, in support of Palestine, according to the group’s statements.
The continued attacks have multiplied the impact across global supply chains. The ramifications extend beyond the maritime domain, affecting companies across sectors, from automotive giants to retail conglomerates, each grappling with unique challenges and implementing adaptive measures to mitigate the impacts.
A Reuters report monitors the reactions of companies from different sectors to the Red Sea disturbances.
Automotive sector..delays in delivery
In the automotive sector, the repercussions of nearly non-functioning shipping routes are clear and tangible:
Geely, China's auto giant and a leading player in the electric vehicle market, is bracing for a hit in sales as deliveries appear to be significantly delayed.
The repercussions extend to the supply chain, with Suzuki production lines halted in Hungary, due to delayed engine shipments from Japan.
At the same time, Tesla, synonymous with cutting-edge electric vehicles, is facing production bottlenecks at its German facilities, exacerbating component shortages.
Tesla faces production obstacles at its German facilities, which exacerbates the shortage of components (Reuters)
The French tire manufacturer Michelin is also not immune to these disturbances, as it admitted on February 12 that the logistical problems associated with the Red Sea crisis affected the flow of its final products, especially natural rubber, while Michelin expects this impact to be relatively marginal on its results. For the year 2024.
On January 12, the Swedish car manufacturer Volvo stopped production at its Belgian factory for 3 days due to delays.
Energy giants grapple with security concerns
The energy landscape is also not immune to turmoil in the Red Sea, as:
BP, the oil giant, said on December 18 that it had temporarily suspended all transportation operations through the Red Sea.
The Norwegian oil and gas company Equinor reported on December 18 that it had changed the course of ships heading towards the Red Sea.
The CEO of Edison Energy Group said on January 25 that the company is witnessing a slowdown in liquefied natural gas supplies from Qatar.
The CEO of Qatar Energy Company said on February 12 that shipping disruptions will affect LNG deliveries but not its production.
The Wall Street Journal reported on January 16 that British oil major Shell had suspended all shipments through the Red Sea indefinitely.
French energy and petroleum company Total Energies said on February 7 that it had not sent ships through the region for several weeks. Its CEO said that the cost of crossing the Red Sea has risen, partly due to the high cost of insurance.
US refining company Valero Energy reported on January 25 that the Red Sea attacks had led to a rise in crude oil shipping prices.
Qatar Energy said last month that shipping disruptions would affect LNG deliveries but not its production (Associated Press)
Logistics services are affected
Although logistics giants such as DHL and FedEx do not operate ships directly, they find themselves at the forefront of managing container transportation disruptions.
The German logistics company DHL, which does not operate ships but uses them to transport containers to its customers, advised on January 8 to scrutinize inventory management.
As for the American shipping giant FedEx, it confirmed that it has not witnessed a major shift to air freight, due to the turmoil in the Red Sea.
Retail giants are trying to adapt
Retail giants face countless challenges resulting from the disruption of shipping methods, including:
Sportswear leader Adidas bemoans margin pressures and warns of potential impacts on working capital, affecting the delicate balance between profitability and operational flexibility.
Danone, a French multinational food products company, is exploring alternative shipping routes to mitigate long-term disruptions, and a company spokesman said that if the situation continues for more than 2-3 months, Danone will activate plans, including using alternative routes via sea or land wherever It is possible.
Swedish furniture giant IKEA said it will adhere to planned price cuts, despite increased costs, indicating that it has enough inventory to absorb any shocks in the supply chain.
Inditex, the company that owns the Zara clothing retail brand, said average shipping times had lengthened by about a week due to the Red Sea crisis after container ships carrying its products avoided the Suez Canal and circled around the southern tip of Africa.
The CEO of British retailer Marks & Spencer said on January 11 that the company expects some slight delays in clothing arrivals and home deliveries due to shipping disruptions.
British clothing retailer Next said on March 21 that it had made amendments to contracts to take into account shipping delays, but added that it did not expect major damage due to the turmoil in the Red Sea.
Pepco, Primark, Sainsbury's, and Target, in addition to Tractor Supply and Williams-Sonoma, are also experiencing challenges in facing the Red Sea disturbances.
Beyond these sectors, companies in various industries are grappling with the repercussions of the Red Sea attacks.
Akzo Nobel, the Dutch paint manufacturer, is facing longer supply lines and rising costs, which is prompting a strategic recalibration to maintain competitiveness.
BHP Group, an Australian mining giant, is weathering disruption by choosing alternative shipping methods, emphasizing the importance of flexibility in turbulent times.
Manufacturers such as Electrolux and Logitech are forming task forces to prioritize deliveries or mitigate high transportation costs, demonstrating the proactive approach required to navigate unpredictable waters.
Strategic imperatives
As companies navigate the choppy waters of geopolitical uncertainty, strategic flexibility is emerging as a cornerstone of survival. Executives are being tasked with striking a delicate balance between short-term challenges and long-term sustainability, with cost management and supply chain diversification emerging as critical strategies.
The evolving situation in the Red Sea underscores the interconnectedness between global trade and the necessity of rapid response mechanisms, according to observers.
The impact of Red Sea disruptions is reverberating far and wide, reshaping the dynamics of global trade and stimulating strategic recalibration among companies around the world.
Source: Al Jazeera + Reuters