The attacks in the Red Sea carried out by Houthi rebels have caused global trade to plummet.
IFW Keil, a German research group, reported recently that global trade for December dropped 1.3% month-over-month, thanks in large part to the attacks on various transport ships that are trying to navigate the all-important Red Sea.
The IFW Keil report also pointed out that the total number of container ships that have navigated through the Red Sea also declined from November to December, Only about 200,000 total containers per day made their way through the sea in December, compared to 500,000 per day a month before.
Many of the world’s leading shipping companies have decided to divert routes to other waterways so they don’t have to face potential attacks from the Houthi rebels, which are based in Yemen and are backed by Iran.
In the report, Julian Hinz, who serves as the director of the Trade Policy Research Center at IFW Keil, said:
“The detour of ships due to the attacks in the Red Sea around the Cape of Good Hope in Africa means that the time it takes to transport goods between Asian production centers and European consumers is significantly extended by up to 20 days. “This is also reflected in the declining trade figures for Germany and the EU, as transported goods are now still at sea and have not already been unloaded in the ports as planned.”
Countries in the European Union have been hit hardest by the effects of the Houthi attacks. Exports from these countries dropped 2% in December, while imports have dropped 3.1%.
IFW Keil reported that exports from the United States dropped 1.5% in that timeframe, while imports also dropped 1%. Chinese exports, meanwhile, increased 1.3%, while imports to the country increased 3.1%.
The Red Sea serves as a main waterway for ships that are transporting goods from Asian countries to Europe and beyond in the west. If they aren’t able to take that shortcut, they are forced instead to sail all the way around the southern tip of Africa.
On average, that can add anywhere from seven to 20 days to the overall trip. In addition, it puts many of these ships at peril of being targeted by Somali pirates and other bad actors around that part of the world.
In addition to the added travel time and other threats, the longer route has caused costs to skyrocket as well.
The IFW Keil report said it cost $4,000 to send a standard container that measures 40 feet from China to Northern Europe in December, compared to only $1,500 in November.
Last month, in response to the Houthi attacks, the U.S. started what it called Operation Prosperity Guardian. It was meant to equalize the threats as well as protect ships from the attacks.
In many ways, it’s worked at deterring future attacks. In addition, the U.S. and UK initiated missile attacks on Houthi targets in Yemen this week in a sign that they are stepping up their efforts to fight back.