The effects of the situation in the Red Sea on the European market are described by the president of the Piraeus Chamber of Commerce and Industry (EVEEP), Vassilis Korkidis, in his article in APE – BPE.
In particular, Mr Vassilis Korkidisemphasizes that the destabilization in Red Sea “immediately endangers the European economy” and adds that, “the problem must be dealt with at a European central level”. The article in detail:
“The situation in the Red Sea has caused structural destabilization in the supply chain, created delays and increases in European trade, while showing shortages of raw materials in the industries of EU countries. The bill of the effects of the Red Sea will come retroactively, it will be ” bloated” and will bring new burdens on both the Greek and the European market.
It is clear that the Houthis are waging a “idiosyncratic” war through global trade, with “collateral damage” to the European economy. The risk of causing new inflationary pressures in the eurozone is visible, due to the irregular situation of commodity flows, while the IMF estimates an increase in inflation, on an annual basis in 2024, by +0.6-0.7%.
According to the IMF’s Port Watch platform, in the last two months, the drop in traffic flows in the number of ships passing through the Suez Canal has decreased by -42% and the volume of transport by -37%, compared to the corresponding period last year. Similar are the measurements of the UN organization UNCTAD which showed a decrease of -67% on a weekly basis and -30% on an annual basis, since in the first fortnight of January, out of 450 scheduled ships, only 176 chose Eritrea and Suez for their journey from Asia to Europe and vice versa.
The European Sea Ports Organization ESPO for the period November – January calculates new increases in “ton miles” and according to Marine Traffic, sailing days from the ports of Asia and mainly China and India to the ports of Northern Europe and Mediterranean, from 17 to 24 days has increased to 38 to 42 days, despite an increase in the average speed of ships by 1.5 knots.
The extra time that ships from the Far East will take to avoid the Suez crossing is estimated at 30%, while for the above miles, from about 6500 to over 11000 that ships will have to travel. In all these cost increases from the expansion of travel, the increased carbon dioxide emissions already in place since the beginning of the year with the EU ETS should also be factored in.
That is, the increased fuel consumption also translates into more pollutant emissions, which means that ships sailing to European ports will pay higher fees due to the European Emissions Trading System.
The Port of Piraeus, from being the first in the Mediterranean, in order of approach for ships passing through the Suez Canal, has turned into the last, since the change of route by crossing the Straits of Gibraltar. With the loss of this important advantage, Piraeus had in the first fortnight of January a -45% reduction in incoming containers, -14% in outgoing and -20% in transit.
But with December arrivals delayed by 14-19 days, due to the African circumnavigation, the port of Piraeus finally closed in January this year compared to last year at -12.6%. At the same time, the freight cost of 40ft containers from Shanghai to Piraeus increased in January with the tripling of rates from $1875 to $6150 to scale back in February between $4800-5700. It should be noted that the port of Piraeus in 2023 received 2.6 million containers, via Suez, which means 50,000 per week.
In the supply chain’s quest to invent new alternative routes, if only temporarily, even road transport from the Persian Gulf to Israel and to Europe began at the beginning of the year. In particular, an Israeli road transport company loads products of all kinds, from food, plastics and chemicals to electrical goods, and transports them from the ports of the Emirates and Bahrain via Saudi Arabia and Jordan to Israel and Europe.
At the same time, a marine transport company is trying to connect the port of Jebel Ali in Dubai with two ports in Saudi Arabia and Jordan. In recent weeks, cargoes from India, Thailand, South Korea and China have been trucked to Europe, while cargoes bound for Asia make the reverse route.
According to the newsit, S&P Global Market Intelligence points out that the alternative route from the port of Jebel Ali to Haifa takes 4 days by road when the circumnavigation of Africa takes at least 14 days. However, the land route is only a short-term solution, since this particular road transport is neither easy nor safe, not even for many containers and large loads.
The Suez Canal is the maritime artery connecting Asia-Europe and the turmoil in the Red Sea has “mined” the flow of the supply chain, threatening the European economy with a new “inflationary wave”. European industrial production is also in “turbulent seas”, since 37 critical raw materials in minerals and metals as well as 30 rare earths are imported by 98% from Asian countries, of which 85% from China.
So, since the Red Sea crisis directly endangers the European economy, the problem must be dealt with at a European central level. The EBEP therefore proposed to the Greek government to request from the EU temporary regulations in the Union Customs Code, imposing a “ceiling” on the charges in duties and VAT on freight rates at the pre-crisis levels, in order to moderate the revaluation of raw materials imported from Asia and products on the European market.
Red’s ‘bill’ may not yet have come to Europe, but it will not be long in coming and it will be very expensive, while once again highlighting the harsh reality of multiple European dependencies.”
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