The Crisis In The Red Sea Threatens To Disrupt Global Supply Chains Even More Than The Pandemic Did

The Crisis In The Red Sea Threatens To Disrupt Global Supply Chains Even More Than The Pandemic Did

Michael S

Do you remember the supply chain problems that we experienced during the darkest days of the COVID pandemic?  Well, now we are being warned that the crisis in the Red Sea could actually disrupt global supply chains to an even greater degree.  Needless to say, this comes at a really bad time because the U.S. economy has really been struggling lately.  The U.S. and the U.K. are desperate to resolve this crisis, and so they have been bombing the living daylights out of the Houthis in Yemen.  We haven’t seen anything quite like this from the U.S. military since the early days of the wars in Afghanistan and Iraq.  On Monday, there was yet another round of air and missile strikes…

The U.S. and U.K. conducted large-scale air and missile strikes on Houthi rebel facilities across Yemen on Monday, according to a joint statement, stepping up operations against the militant group as it vows to continue attacking ships in the Red Sea.

The U.S. and U.K. militaries, with support from Australia, Bahrain, Canada and the Netherlands, hit eight Houthi targets in Yemen in response to the Houthis’ continued attacks, according to a joint statement from the countries involved. The precision strikes were “intended to disrupt and degrade the capabilities that the Houthis use to threaten global trade and the lives of innocent mariners,” the statement said.

Unfortunately, so far the strikes don’t seem to be doing much good.

The Houthis continue to attack commercial vessels in the Red Sea, and this is greatly frustrating U.S. officials.

When asked about the air and missile strikes, Joe Biden admitted that they are not working but he says that they will continue anyway…

President Joe Biden and his top aides have repeatedly said strikes on Houthi targets alone won’t stop the Iran-backed militants from threatening commercial ships in the Middle East.

When asked by a reporter last week if the airstrikes were working, Biden responded “Well, when you say ‘working,’ are they stopping the Houthis? No. Are they going to continue? Yes.”

In addition to air and missile strikes, will we soon see additional measures?

It is being reported that the Biden administration is now planning a “sustained military campaign” against the Houthis…

Over the weekend US officials told The Washington Post that the Biden administration is planning for a “sustained military campaign” against the Iran-backed Yemeni rebels, even after some seven rounds of major strikes have done nothing to deter or degrade their drone and missile attacks. Notably, US leaders have still refused at this point refused to use the word “war” in relation to the large-scale US coalition attacks on Houthis as part of Operation Prosperity Guardian.

That definitely sounds like a war to me, and Congress has not approved it.

But of course our federal government has not been following the Constitution for a very long time.

So what all of this means is that the crisis in the Red Sea is going to persist for the foreseeable future.  At this point, shipping giant Maersk is warning their customers that there will be “significant disruption to the global network”…

The situation around the Red Sea / Gulf of Aden continues to be closely monitored by our teams. In the interest of safety for our vessels, crew and customers’ cargo, all vessels previously due to transit the area have been diverted south around the Cape of Good Hope for the foreseeable future.

While we hope for a sustainable resolution in the near-future and do all we can to contribute towards it, we do encourage customers to prepare for complications in the area to persist and for there to be significant disruption to the global network. Our teams are on hand to support with your planning, should you need any assistance.

And at the World Economic Forum’s yearly gathering the CEO of Maersk actually admitted that we could see “disruptions of the supply chain for a few months at least”…

“So for us this will mean longer transit times and probably disruptions of the supply chain for a few months at least, hopefully shorter, but it could also be longer because it’s so unpredictable how this situation is actually developing.” 

This is very serious.

There will be delays and there will be shortages.

Many commercial ships are now being routed all the way around the continent of Africa, and that can add approximately 3,500 nautical milesto each journey…

Steering clear of the Red Sea and taking the lengthy detour around the Cape of Good Hope, however, adds around 3,500 nautical miles (6,500km) and 10-12 days sailing time to each trip. This requires extra fuel (an additional $1m/£790,000’s worth according to some estimates), possibly finding alternative ports of call, adjustments to delivery timetables, and rising costs. But many companies are making that choice rather than risk attack by missiles and hijackers.

One firm that has analyzed the crisis in the Red Sea is claiming that it is already damaging global supply chains more than the COVID pandemic did…

A leading ocean supply chain advisory firm is warning that the disruptions to shipping from the Houthi rebel attacks in the Red Sea are already more damaging to the supply chain impact than the early Covid-19 pandemic.

Sea-Intelligence analyzed current vessel delays compared to delays over the last several years in a report for clients. The data shows that the longer transit around the Cape of Good Hope as ships divert from the Red Sea is already having a more significant impact on vessels available to pick up containers at ports than during the pandemic. This supply chain measure is known in the industry as “vessel capacity.”

Supply chains in Europe and Asia are being hit harder than supply chains in North America.

In fact, some automakers in Europe have already announced that they are “temporarily halting production”…

But even though Europe and Asia will experience more disruptions than we will, the truth is that the entire globe will eventually feel the pain.

And if the war in the Middle East goes to an entirely new level later this year, that will make things many times worse.