Global supply chain hit… prices fluctuate
Following the Red Sea, ships were attacked in the Indian Ocean.
In addition to the Red Sea on the west side of the Arabian Peninsula, which is the shortest route between Asia and Europe, civilian ships are being attacked by drones from Iran in the eastern Indian Ocean, causing global oil prices and insurance premiums to fluctuate. Since the outbreak of the Middle East war on October 7, Yemen’s Houthi rebels, supported by Iran, have been attacking civilian ships passing through the Red Sea one after another, and this is the first time that Iran has been pointed out as behind an attack on a civilian ship. There are concerns that the crisis in logistics, including oil and gas, may increase.
On the 22nd (local time), the U.S. Department of Defense said in a statement, “The Liberian-flagged chemical tanker ‘Khem Pluto’ was hit by an attack drone launched from Iran in the Indian Ocean, about 200 nautical miles (370 km) off the west coast of India.” According to the Wall Street Journal (WSJ), the Chem Pluto was heading to Mangalore, western India, carrying refined products from Jubail Port in eastern Saudi Arabia.
The WSJ reported that this is the first time that Iran has been pointed out as being behind a direct attack on a civilian vessel during the war between Israel and the Palestinian armed group Hamas. The vessel, owned by Japan’s Rio Brillantes, is managed by Dutch Ace Quantum Chemical Tankers, which is linked to Israeli shipping conglomerate Ethan Ofer.
The government does not yet believe that there will be any impact, such as disruption to exports of domestic companies or rising domestic prices, due to the logistics threat from the Houthi rebels. However, if the situation is prolonged, there is a potential for supply chain disruptions to push up prices as international freight rates and oil prices rise.
Ships detour to Africa… transport delay
In the long term, there are concerns that oil prices and inflation will rise together.
Houthi rebels began attacking commercial ships passing through the Bab el-Mandeb Strait, which runs from the Red Sea and the Gulf of Aden south of Saudi Arabia to the Indian Ocean. This is the 14th or 15th attack since the start of the Middle East war. The U.S. Central Command announced that a destroyer belonging to the Eisenhower Carrier Strike Group patrolling the southern Red Sea from 3 to 8 p.m. on this day shot down four drones that had sortied from an area controlled by Houthi rebels. They also announced that they received reports from two civilian ships that they were under drone attack by Houthi rebels in the southern Red Sea around 8 p.m. on this day.
As the logistics crisis caused by the Houthi rebels’ successive attacks on ships is becoming a reality, shipping freight rates are also rising. According to CNBC on the 21st, Swiss MSC, the world’s largest shipping company, reportedly increased container freight rates from India to the United States by 30 to 40 percent. The freight rate for a 40-foot container on the India-US east coast route is said to have increased from $2,000 to $7,000 a month ago. The price for the route between Shanghai, China and the UK jumped from $2,400 to $10,000, which is four times the price. Shipping rates, which fell sharply at the end of last year due to the global economic slowdown, are rising, so there is still room for this, but the severity may increase as the Red Sea situation prolongs.
Global oil companies such as British Petroleum (BP) and Equinor are bypassing the Red Sea, which accounts for about 12% of global maritime trade. In the past week, 33 container ships returned to South Africa’s Cape of Good Hope, delaying transportation from Asia to Western Europe for about 60 days.
The government currently believes that the impact of the oil price increase on the domestic market will be limited. This is because Saudi Arabian oil is imported not through the Red Sea but through the Persian Gulf on the east side of the Arabian Peninsula. However, there are concerns that if the situation is prolonged, international freight rates and oil prices may rise, pushing up prices.
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Source: Donga
Mark Jones is a world traveler and journalist for News Rebeat. With a curious mind and a love of adventure, Mark brings a unique perspective to the latest global events and provides in-depth and thought-provoking coverage of the world at large.