How have Red Sea attacks by Yemen’s Houthi fighters affected companies?

The strikes have forced ships to change route, causing major disruptions in companies’ chains of production.

A video shows Houthi fighters’ takeover of the ship Galaxy Leader in the Red Sea near Hodeidah, Yemen [File: Houthi Movement via Getty Images]Published On 4 Feb 20244 Feb 2024

Attacks on vessels by Yemen’s Houthi rebels in the Red Sea have disrupted international trade on the shortest shipping route between Europe and Asia.

The strikes, which came in solidarity with Palestinians facing Israeli bombardments in Gaza, are targeting a route that accounts for about 15 percent of the world’s shipping traffic, forcing several shipping companies to reroute their vessels.

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The Houthi assaults have pushed several commercial vessels passing through the Suez Canal and the Bab al-Mandeb Strait to take an alternative and much longer route around South Africa’s Cape of Good Hope, causing major changes and delays.

Here’s a look at the impact the Houthi raids had on major companies:

Autos

Geely: China’s second-largest automaker by sales said on December 22 that its electric vehicle (EV) sales would likely be impacted by a delay in deliveries.

Michelin: Four factories in Spain owned by the French tyre maker halted output on January 20-21 due to raw materials delivery delays.

Suzuki: The company’s Hungary production plant restarted manufacturing on January 22 as planned following a halt the previous week due to delays in the arrival of Japanese-made engines. It said shipping routes were changed to pass around Africa, which could affect pricing.

Tesla: The US-based electric vehicle maker will suspend most car production at its factory near Berlin from January 29 to February 11 due to a lack of components caused by shifts in transport routes.

Volvo: The Swedish automaker said on January 12 that it would halt production at its Belgian plant for three days due to delays.

Energy

BP: The oil major on December 18 said it had temporarily paused all transits through the Red Sea.

Equinor: The company said on December 18 that it had rerouted vessels that had been heading towards the Red Sea.

Edison: The energy group’s CEO said on January 25 that it was starting to experience a slowdown in liquefied natural gas (LNG) supplies from Qatar.

Qatar Energy: The world’s second-largest exporter of LNG has stopped sending tankers via the Red Sea although production continues, a senior source with direct knowledge of the matter told the Reuters news agency on January 15.

Shell: The British oil major suspended all shipments through the Red Sea indefinitely, the Wall Street Journal reported on January 16.

Valero Energy: The US refiner said on January 25 that the Red Sea attacks have led to a rise in freight rates for crude oil.

Logistics

DHL: The German logistics company, which does not operate ships but uses them to transport containers, on January 8 advised customers to take a close look at how they manage inventories.

FedEx: The US parcel delivery giant said on January 14 that it hadn’t seen much of a shift to air freight due to disruptions in the Red Sea.

Retailers

Adidas: CEO Bjorn Gulden said on February 1 that shipping disruptions in the Red Sea were negative for gross margins, adding that “exploding” freight rates were driving up costs and shipping delays were causing some delivery issues.

Danone: The French food group said in December that most of its shipments had been diverted, increasing transit times. Should the situation last beyond 2-3 months, Danone will activate mitigation plans, including using alternate routes, its spokesperson said.

Ikea: The furniture retailer is sticking to planned price cuts despite increased costs, and has sufficient stocks to absorb any supply chain shocks, it said on January 15.

Marks & Spencer: The British retailer’s CEO said on January 11 that the company is expecting some slight delay in clothing and home deliveries due to the disruption to shipping.

Next: The British clothing retailer’s CEO on January 4 said sales growth would likely be moderated if disruptions continued through 2024.

Pepco: The Poundland owner warned on January 18 that its supply could be impacted in the coming months if the disruptions continue.

Primark: Associated British Foods’ finance director said on January 23 that Primark is coping with disruptions by adjusting timings and stock flow.

Sainsbury’s: “We’re making sure that we plan the sequencing of product from Asia Pacific so that we get products in the right order,” the company’s CEO said, adding that long-term contracts with shippers “mitigate any cost impact as far as possible”.

Target: The US retailer is experiencing some disruptions of shipments from India and Pakistan, a source familiar with the matter said on January 12, calling the effect “minor” overall.

Tractor Supply: Deliveries for the US retailer have been delayed anywhere from two to 20-plus days, the company’s chief supply chain operator said on January 12.

Williams-Sonoma: The Pottery Barn owner is rerouting shipments and has been working on contingency plans, its CEO told CNBC on January 24.

Others

BHP Group: The Australian mining giant on January 25 said the disruptions were forcing some of its freight service providers to take alternative routes, such as Africa’s Cape of Good Hope.

Electrolux: The Swedish home appliance maker has set up a task force to find alternative routes or identify priority deliveries to try to avoid disruptions. On February 2, its CEO said that costs related to the developments in the Red Sea were manageable. “If the situation is prolonged, I am more worried about higher costs than about risk of having to pause production,” he added.

Essity: The maker of brands such as Libresse and TENA said it was staying in contact with impacted suppliers to ensure the continued flow of goods. On January 25, its CEO said that it saw a negative impact on its freight costs, but he could not specify what that impact would amount to.

Evonik: The speciality chemicals maker said it was being hit by “short notice routing changes and delays”, and was trying to mitigate the impact by ordering earlier and switching to air freight where possible.

Gechem GmbH & Co KG: The German chemicals maker said it had lowered production of dishwasher and toilet tablets as a result of the delays.

Kone: The Finnish elevator maker said the situation may in some cases delay shipments, but most of its customer deliveries should stay on schedule. Kone said it had prepared for the disruptions by seeking alternative delivery methods and routes.

Levi Strauss & Co: The denim maker is experiencing delays of 10 to 14 days in transit times as a result of continued disruptions to Red Sea shipping. It has shifted some US shipments to the West Coast, avoiding the Red Sea and Suez Canal.

Logitech: The computer peripheral maker’s CEO on January 23 said profit margins will be hit by higher transport costs due to the Red Sea crisis.

Source: Al Jazeera and news agencies