Analysis by Energy Workforce President Tim Tarpley
Despite a series of missile strikes over the past two weeks led by the United States and Britain against Houthi targets inside Yemen, the attacks in the Red Sea region continue. The ultimate strategic endgame of the Houthi-led attacks is somewhat unclear, but it is nearly certain that the attacks are being directed by Iran and that they are not deterred by the British and US strikes. Iran separately launched a rocket attack allegedly directed at separatists within Pakistan, a move that was strongly condemned by Pakistan, who eventually responded with a rocket attack of their own, also allegedly directed towards separatists located within Iran.
In response to these continued attacks in a region that is a key transit point for ships passing through the Suez Canal, the average worldwide cost of shipping a 40-foot container rose 23% in the week through Jan. 18 to $3,777. The routes that are most affected are the ones that link China with Europe and the U.S. East Coast. Spot-market rates to ship a container from China to Los Angeles rose 38% in the week through Jan. 18 to $3,860. Not just container ships are being affected either; gasoline tankers are being forced to reroute, and prices have been affected. The day rate for a single cargo of gasoline heading from northwestern Europe to the east coast of the United States reached nearly $38,000 per day on Monday.
What does all this mean for EWTC Members? Well, unfortunately, it means that uncertainty and increased costs are returning to worldwide shipping. Without a near-term end to the attacks, it is likely that we begin to see price changes and delays throughout the supply chain, much like we saw during the post-Covid era. To some extent, prior to this return of volatility, some normalcy had returned to supply chains and there was hope that further disruptions could be avoided throughout 2024.
There does not appear to be an immediate end in sight either. As vessels and cargoes are increasingly being rerouted around Africa to avoid the Red Sea, delivery times are being significantly increased, and the availability of these ships to deliver additional cargo is being limited, causing a domino effect in shipping availability. The longer the disruptions continue, the greater the effects will be. It is difficult to predict how long the situation will continue because while the ultimate strategic goals of the Iranians are hard to fully ascertain, it is clear that absent significant change in circumstances, we can expect the disruption to continue in the near term.
Tim Tarpley, Energy Workforce President, analyzes federal policy for the Energy Workforce & Technology Council. Click here to subscribe to the Energy Workforce newsletter, which highlights sector-specific issues, best practices, activities and more.