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- Major shipping companies are imposing surcharges to reroute vessels from the Red Sea.
- Yemen's Iran-linked Houthi rebels have been attacking vessels in the Red Sea.
- The Red Sea connects with the Suez Canal — the shortest shipping route between Asia and Europe.
Major shipping companies are imposing surcharges to reroute vessels from the Red Sea amid attacks on vessels by Yemen's Iran-linked Houthi rebels.
Shipping giants Maersk and CMA CGM announced the fees late last week. They have already suspended passages across the Red Sea that connects with the Suez Canal — the shortest shipping route between Asia and Europe.
Many ships headed for the Red Sea are now taking longer journeys around the Cape of Good Hope in the south of Africa. This adds some 10 days to a journey from China to Northern Europe, which typically takes about 27 days, according to Reuters.
Maersk — the world's second-largest shipping company by capacity — said in a notice last Thursday it would be imposing a "Transit Disruption Surcharge" with immediate effect. It would also be imposing a "Peak Season Surcharge" for some markets from January 1.
"Diverting vessels around the Cape of Good Hope to mitigate the ongoing risks of sailing through the region is a necessary step in the interest of safety, but it has ultimately brought about increased costs for carriers," Maersk, a Danish company, said in a Thursday advisory.
Maersk is now imposing an extra $200 Transit Disruption Surcharge on a standard 20-foot container traveling from China to Northern Europe. Ships sailing the same route from January 1 would have to pay another $500 in Peak Season Surcharge for a container of the same size.
France's CMA CGA also announced similar surcharges on Friday, including a $325 surcharge for each 20-foot container on the North Europe to Asia route and a $500 surcharge per 20-foot container sailing from Asia to the Mediterranean next year.
The surcharges could feed into inflation for consumers at a time when price increases are just about stabilizing.
In November, US's Consumer Price Inflation rose 3.1% year-over-year. While this was still under the Fed's 2% target, it was significantly below the 40-year high of 9.1% in June last year.
"Issues in the Red Sea threaten supply chains and have pushed up the oil price, both drivers for inflation," AJ Bell investment director Russ Mould said last Wednesday, as reported by Business Insider's George Glover. "Therefore, this is a somewhat muddy situation."