- Red Sea ship attacks escalate
- Vessels face higher costs
- Union protections impact shipping
Following an escalation of ship attacks, unions and the shipping industry have broadened the categories of vessels obligated to remunerate mariners at a higher rate in the Red Sea.
As major goods companies continue to circumvent the critical Red Sea route and labour unions strengthen protections for mariners, the price of transporting goods has once more increased substantially.
The cost of goods increased by 80% in the previous week, following a nearly 50% increase the week prior.
The Shanghai Containerised Freight Index (SCFI), the most widely used measure of freight cost, increased to $2,694 (£2,113) per container from $1,497 (£1,177) on Friday, December 22nd.
Not in the fifteen months since September 30, 2022, had the price been this high.
The index calculates the mean expense associated with transporting a 20-foot container from Shanghai to Europe.
Elevated shipping costs exert an influence on the total amounts paid at the time of purchase and may potentially contribute to inflation, given that the majority of products transit through the sea en route to consumers.
The Red Sea’s Impact on Shipping Routes and Costs
The Red Sea serves as a critical supply route that has become progressively perilous due to the actions of Houthi militants in Yemen, who support Palestine and have targeted vessels they perceive to be transporting goods from Israel.
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By bypassing the region, one may extend their voyage duration by as much as two weeks, as an alternate route circumnavigating South Africa via the Cape of Good Hope.
Price increases persist notwithstanding the resumption of certain Red Sea voyages by the second largest container shipping company, Maersk, and the initiation of Operation Prosperity Guardian, a multinational naval force headed by the United States and designed to repel attacks.
Mediterranean Shipping Company (MSC), the largest container transportation company, is among the other companies that continue to divert vessels.
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The significant expansion of vessels influenced by the warlike area designation established by labour unions and industry is an additional cost factor.
The extension of Red Sea recommendations by the UK Warlike Operations Area Committee (WOAC), comprised of unions Nautilus International and the RMT, as well as industry representative the UK Chamber of Shipping, resulted in increased protections for seafarers but increased insurance premiums for operators, on Wednesday.
Currently, vessels owned by companies engaged in trade with Israel, which have made or are scheduled to make port calls in Israel since June 21, have any established ties to Israel, or have done so since June 21, 2023, are obligated to increase the wages of their mariners and grant them the prerogative to decline a Red Sea voyage without facing termination.
In the past, the criteria applied exclusively to vessels that had a managerial or ownership affiliation with Israeli-owned enterprises.
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