The blockade of the Red Sea predicts delays of up to 21 days in textiles, electronics and cars and opens the door to new price increases

2024-02-04 11:28:56

In this multi-band diagnosis there are no cracks. The crisis in the Red Sea has begun to be felt days ago in Spanish companies that are dedicated to trade.; In addition, its effect will soon begin to be palpable also for the end customer, especially in the field of textiles, electronics and when it comes to cars; But everything learned after the pandemic, the ship stranded in the Suez Canal and the war in Ukraine almost eliminates the possibility of a stock rupture like those experienced then. “The sectors that could be most affected have worked hard to have contingency plans to respond to this type of problems,” resolves a first source from the distribution sector. “The industry has learned from previous situations,” agrees a second voice related to the automobile industry. “There have been a series of critical episodes that have made companies more prepared: they now have greater security stocks,” emphasizes a third analyst, this transportation expert.

None of them hides the fact that the time it takes for certain goods to arrive from Asia has now increased. from 5 to 21 daysthat the price they pay for it is much higher and that, if this situation continues much longer over time, there will be no other option than pass it on to the final price. Nor, although there is currently no excessive concern, there is some fear of what may happen if this crisis worsens.

In essence, the problem dates back to the end of last year, when the Houthi movement in Yemen began attacking and hijacking ships in the Red Sea, apparently targeting vessels linked in some way to Israel. The point is that, being this one of the key routes for international trade (moves 40% of trade between Asia and Europe, according to the financial services and analysis group Nomura), the majority of shipping companies decided to opt, preventively, for alternative circuits.

“To get to Europe, they now use a longer route, which is to go down to South Africa and go up along the border of Africa to the Iberian Peninsula, and this has greatly disrupted the plans of all companies in terms of supply chain, because before the goods arrived at one time, and now there are delays“, contextualizes the head of transport for the association of manufacturers and distributors of consumer products Aecoc, Javier Jaso. “This has a significant economic impact, because it is a longer route, it implies more fuel consumption, more insecurity…therefore, there has been an exponential rise in the price of maritime freight,” points out this expert.

Specifically, Jaso speaks of a 60% increase in prices in just the last three weeks, to which are added the misgivings of insurers about covering certain merchandise or the fact that, given the slightest possibility that there may be a lack of product, companies have decided to preventively increase the volume of their orders, pushing the capacity of the vessels to the limit and encouraging a system based on whoever pays the most, leaves first. The credit insurance company Crédito y Caución speaks of an increase in the cost of maritime transport of 300%.

Possible price increases

From what this Aecoc spokesperson knows (and corroborates two other sources consulted) the companies are assuming this increase in price without transferring it to the final price, aware of the high possibility that the client will not tolerate another price increase. “Everything will depend on how long it takes for this situation to be resolved: if it continues for a long time, it is possible that part of this extra expense that companies are assuming to guarantee supply could be passed on to the end customer,” predicts Jaso.

“The fear – agree from ANGED, the National Association of Large Distribution Companies – is that this will drag on for a long time: The most serious impact will be seen if this crisis lasts long or deteriorates”.

Impact on Volvo, Michelin or Ikea

At the moment, a recent analysis by Nomura already ensures that “upside risks for inflation” in the medium term, between 1 and 2 tenths at the European level, facing September. In their report, they give as an example Tesla’s decision to suspend a good part of its car production in its Berlin factory until mid-February, that Volvo has paused its activity at the Belgian plant for a few days, that Michelin has recently stopped a weekend its activity in its four Spanish plants due to the delay in the arrival of certain materials, or that Ikea has notified in the Netherlands of possible delays in the delivery of goods.

“It is likely that the modification of longer and less secure supply chains will cause product shortages in some sectors,” analyzes the latest Crédito y Caución report. “European manufacturers import a wide range of intermediate goods from Asia-Pacific, such as electrical equipment, high-tech goods, rubber and plastics, chemicals and machinery“, they detail. Javier Jaso, from AECOC, adds the textile sector to this list, not only in terms of finished product, but also as raw material.

“Whoever has ordered an Asian brand car will have to wait three weeks longer than expected, but the same with the iPhone, which is made in China, or with a Samsung or LG television,” specifies a source specialized in the industry. the motor.