The Cease Fire in Gaza Is Great News But ……….
According to a news item on Bloomberg on January 23rd, major ocean carriers have decided not to revert to using the Red Sea and Suez Canal, despite vows from Houthi rebels to scale back attacks on vessels moving through the region. Several of the largest container shipping companies have reached the same decision.
About 70% of vessels have been sailing thousands of miles extra around Africa rather than revert to the shorter Red Sea/Suez Canal route. More than one hundred vessels have been attacked and two sunk since the Hamas terror attack. Four seafarers have been killed and the 25-member crew of one ship were held as hostages for some time but were released on 22nd January.
What this means for retailers is that they still need to run with higher inventory levels to cope with the longer sailing times, they need to bring new season merchandise in earlier than before the attacks started, and their inventory carrying costs are more expensive. In view of the associated higher forecast error due to the longer lead times, it is also possible that many are experiencing higher clearance markdowns and higher lost sales.
This will reinforce interest in moving more purchasing back to the home country or neighbouring countries. This reinforcement may also be amplified due to the Trump administration’s introduction of greater tariffs on countries with significant exports to the USA, further eroding the gross margin gain from long distance importing.
To understand how to quantify the cost impact of this click here.-
Posted by Brian Hume
10th February 2025
