The Red Sea crisis raises transportation costs by 300%

The crisis in the Red Sea continues to escalate, and attacks on container ships by Houthi militants have caused maritime transportation costs to rise by 300%, according to a report issued by insurance company Crédito Y Caución on Tuesday, January 23.

This scenario raises fears of supply chain bottlenecks and exacerbated inflation risks. The report notes that this 300% increase is due to the fact that commercial ships have to take “longer, more expensive routes to avoid the conflict zone and bear increased insurance costs.”

However, these attacks, although causing problems for shipping companies and the industries that depend on them, have had a limited impact on the global economy, with most economists expecting this to continue, at least in the short term.

“About 30% of all container shipping passes through the Red Sea, an important channel for transporting goods from the Asia-Pacific region to Europe. Major shipping companies have suspended operations in the region and diverted ships to the Cape of Good Hope. The cumulative effect of another nine days at sea will Inevitably disrupting global logistics and supply chains. The document stated that the actual closure of the Red Sea Route could reduce international maritime transport capacity by about 20%.

Niels de Hoog, chief economist at Atradius and a specialist in Middle East affairs, believes that the crisis is unlikely to reverse the downward trend in inflation or force the suspension of interest rate cuts scheduled for the middle of this year.

“The impact of Houthi attacks and rising shipping costs on global inflation is expected to be very limited. At most, this will slow the current rate of inflation returning to normal compared to the post-pandemic peak,” the economist says.