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Attacks on vessels by Yemen’s Houthi rebels in the Red Sea have disrupted international trade, threatening price hikes and shipment delays. Many importers are revisiting coping strategies tapped during the pandemic.
The Suez Canal is the main route for shipping from Asia to Europe and the East Coast of North America.
In December, IKEA became the first major retailer to indicate it was exploring other options to secure products after major shipping companies stopped sending vessels through the Suez Canal in response to the attacks by militants protesting against the Israel-Gaza war that started in October.
Scores of container ships at the time began rerouting around southern Africa to avoid the area, adding “up to 14 extra days to a ship’s journey” from Asia to Europe.
“The situation in the Suez Canal will result in delays and may cause availability constraints for certain IKEA products,” IKEA said.
Last week, Adidas CEO Bjørn Gulden said spot freight rates “are exploding again” due to disruptions in the Red Sea. He said on Adidas’ fourth-quarter analyst call, “If you don't have a long-term contract or you ship more than your contract, there is an increased cost because of that. There is a delay currently of about three weeks which of course causes some delivery issues, especially to the European market.”
Daniel Ervér, H&M’s new CEO, told Reuters that the fast-fashion retailer is reviewing what it needs to transport via air freight, which is more costly. H&M is also continuing to invest in nearshoring in Europe and Latin America as well as buying more in-season to mitigate the disruption.
Last week in prepared testimony for the House Subcommittee on Coast Guard and Maritime Transportation, Jonathan Gold, the National Retail Federation’s VP of supply chain and customs policy, said NRF members are already pursuing mitigation strategies to ensure back-to-school and holiday shipments, including rerouting cargo around the Cape of Good Hope, which is estimated to cause delays of 10 to 14 days.
Some cargo is also being shifted to arrive in West Coast ports to avoid Red Sea disruption, then shipped to the East Coast via rail. Air cargo is being used by some retailers for more sensitive and timely shipments, Gold noted, while earlier shipments are being encouraged.
Against this backdrop, Gold urged the federal government to pay attention to freight rates and port congestion, noting that the West Coast shift may cause congestion at the ports that are not planning for the cargo surge. He also urged the government to be aware of vessel and equipment issues.
"There is growing concern about the impact on empty container availability overseas," Gold said. "We have heard from some members that vessel space is becoming increasingly constrained, which may impact replenishment for spring and summer merchandise."