Freight costs are soaring as the crisis in the Red Sea continues unabated. Attacks on shipping vessels by Yemen’s Houthi rebels have forced carriers to divert their cargo, taking a longer and more expensive route around the Cape of Good Hope. Experts say that if the crisis is not resolved, it could result in higher prices for Taiwan’s consumers.

Natasha Bertrand
CNN reporter
The uptick that we have seen is really remarkable, it has really ensnared international shipping and commerce.

With shipping attacks continuing in the Red Sea, freight firms have been forced to avoid the Suez Canal, the shortest shipping route between Asia and Europe. The canal handles some 12% of the world’s shipping traffic each year. The new longer routes have added days of travel time, raising freight costs, delaying deliveries, and hurting global trade.

Anna Stewart
CNN reporter
There are a number of concerns here, for oil particularly. First of all, this is an important route for oil tankers of course, and some of them like BP are already taking a very long route around. There’s also a big risk of escalation at this stage.

Carriers have already diverted more than US$200 billion in trade from the Red Sea. Assuming a cruising speed of 15 knots, redirected freight must travel at least 10 extra days, raising costs for fuel and crew labor. Analysts say that if the crisis continues unabated, these higher costs will be eventually be borne by consumers, posing a fresh inflation risk.

Wang Ching-feng
Shipping expert
Some estimate the delay to be 15 days. There are extra transport costs and fuel costs. And now there’s also a container detention and demurrage charge. Altogether, these fees have already exceeded freight rates of the containers. The likelihood of the crisis abating over the short term is not high.

In this week alone, cargo rates for Asia to Europe have doubled. To make matters worse, the Panama Canal is cutting 40% of its vessel traffic due to drought. The longer wait times are set to further raise costs for shipping between the U.S. and Europe. Although the crisis has boosted Taiwan’s shipping stocks, by up to 30%, experts warn that the gains are short-lived. Once the Red Sea crisis is resolved, they say, stock prices are expected to correct.

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