Container prices have quadrupled in past month as ships are diverted around coast of Africa
Escalating attacks on shipping by Houthi rebels in Yemen is a “significant issue” for construction products, importers have been warned.
Prices for 40ft containers from the Far East to northern Europe have more than quadrupled in the past month, from around $1,170 at the beginning of December to more than $4,400 last week.
Costs have soared due to the increased frequency of attacks in recent weeks by Houthis, a militant group which controls the southern entrance to the Red Sea and the Suez Canal. Around 30% of international container traffic passes through the vital shipping lane.
Nine out of 10 container ships are now being rerouted around the Cape of Good Hope at the southern tip of Africa, adding up to 20 days to journey times to the main European port at Rotterdam.
Although 75% of UK construction products are manufactured in the UK or Europe, supply chains are international with many components and materials coming from China, including most electronics.
Many products including steel and sanitary ware, such as basins and toilets, are also imported directly from the region.
Construction Products Association chief executive Peter Caplehorn said the disruption is starting to cause the same sort of supply chain issues seen during the covid pandemic, albeit at a lesser degree than during the height of delays in 2021 when shipping costs peaked at around $20,000 per container.
But he said it came at a “very bad time in the economic cycle” for the industry following a period of high inflation.
“I think it is a significant issue but it’s difficult to see exactly how it’s going to pan out just yet,” Caplehorn said.
“You’ve got a situation where it’s much more challenging for ships, and so therefore that’s going to be reflected in the price.
“In a moment where we want trading to improve for everybody’s benefit, this is very much a drag on the ability to improve, and so clearly, it’s a concern.”
He added: “We don’t want to talk up a problem but we are keeping a careful eye on this because nobody knows how long this is going to go on for and nobody knows if things are going to get worse,” Caplehorn said.
Meanwhile, auditor RSM has warned that the disruption to construction’s supply chain could lead to higher inflation.
“Productivity [in construction] is currently impacted by the Red Sea crisis and the delayed shipment of materials,” said Stacy Eden, partner and national head of real estate and construction at RSM UK.
“This will cause further disruption to the supply chain in Q1 2024 and runs the risk of bringing back inflation.”
The UK, the US and three other western allies carried out strikes on dozens of Houthi targets in Yemen last week following weeks of warnings to the rebel group.
The Houthis have issued statements saying they are not deterred by the attacks, which they described as a “mistake” and “the greatest folly in their [the UK and the US] history”.
Rishi Sunak is to address MPs later today for the first time since the strikes were authorised. Defence secretary Grant Shapps has warned there will be further strikes if the Houthis continue their attacks on shipping.
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