Red Sea ship attacks already causing higher prices, temporary shortages: experts

“The supply chain is not an obscure thing that’s just out there. It affects us enormously.”

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Trade disruptions triggered by commercial vessel attacks in the Red Sea are already having an impact in Quebec in the shape of higher prices and product shortages as shipping times lengthen, conference attendees were told Monday.

Bypassing the Suez Canal and travelling around the southern tip of Africa costs every ship that sails from Europe to Asia an extra US$1 million in fuel per journey, Rodney Corrigan, president of Logistec Stevedoring Inc., said at an event hosted by the Canadian Club of Montreal. In Quebec, the longer shipping times have resulted in a temporary shortage of some Australian wines, added Luc Bourdeau, supply chain vice-president at the Société des alcools du Québec.

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Houthi rebel-led attacks on ships have caused a 42 per cent plunge in weekly transits going through the Suez Canal over the last two months, according to data from the United Nations Conference on Trade and Development (UNCTAD) released last week. Many shippers have since sought alternative routes, extending cargo travel distances and pushing up container costs as well as greenhouse gas emissions due to vessels sailing at greater speed.

The trade disruptions are “having a direct impact on our daily lives,” said Corrigan, whose firm provides such services as container cargo handling in 60 ports and 90 terminals across North America, including Montreal.

“In North America, we are starting to see price increases,” some of which are close to 30 per cent, depending on the country of origin and the port of destination, he said.

Higher transportation costs could “have the impact of keeping the global inflation rate at three per cent,” Corrigan added. “The supply chain is not an obscure thing that’s just out there. It affects us enormously.”

Average container shipping spot rates from Shanghai have more than doubled since early December, according to UNCTAD data. Rates from Shanghai to Europe have more than tripled, while rates to U.S. West Coast ports have more than doubled even though the ships do not go through Suez, UNCTAD also said.

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Issues in the Red Sea and the Suez Canal “are increasing prices and putting pressure on inflation,” said Canadian National Railway chief strategy officer Patrick Lortie, who also took part in Monday’s event. “They are also putting the focus on the West Coast” ports of North America as shippers increasingly avoid Suez, he said.

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Quebec’s state-owned alcohol monopoly is one of those customers that have been forced to make adjustments.

Australian wines bought by the SAQ, which normally transit through Singapore, Europe and the Port of Montreal, have been rerouted in recent weeks, Bourdeau said Monday. As long as the Red Sea attacks continue, the SAQ’s Australian wines are being shipped to British Columbia via the Pacific Ocean before being put on a cross-Canada train, which results in one-time costs because the railcars need to be heated to ensure the product does not freeze. The new route has extended shipping times by two to three weeks, Bourdeau said.

“The Red Sea conflict affects everything that we receive from Australia,” he said in an interview after the panel discussion. “Right now, we are confident that by buying ahead of time, the products will come in when we need them and the pipeline will be restocked. There will be a transition period until the first orders that we placed in December come in. After that, we won’t have issues with Australia. The situation will stabilize once the new products are on the shelves.”

Australia accounted for 4.4 per cent of all wine volumes sold by the SAQ during the year ended in March 2023, according to the company’s most recent annual report. French wines were the top seller, with nearly one-third of volumes, followed by Italian wines, at 23 per cent.

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