The global shipping industry continues to grapple with increased costs and delays following geopolitical tensions in the Middle East.
- Attacks by the Iran-backed Houthi movement have prompted major rerouting of shipping lines, affecting freight times and costs.
- The fashion industry’s supply chain has been significantly impacted, with companies seeking alternative transportation methods.
- Shipping rates have seen marked increases, with costs for transporting goods from Asia to Europe particularly affected.
- Retailers are adjusting their ordering practices in response to these extended shipping times and rising costs.
The global shipping industry remains in the throes of increased costs and delays, significantly influenced by the geopolitical landscape in the Middle East. On 19 October last year, the Iran-backed Ansar Allah, commonly referred to as the Houthi movement, launched tactical strikes on commercial vessels operating in the Red Sea. This has forced shipping routes travelling between Europe, the Far East, and India to circumvent the Suez Canal, opting instead for the longer route around the Cape of Good Hope. This diversion inevitably results in prolonged transit periods and heightened shipping expenses.
These logistical challenges have had a profound impact on the fashion industry’s supply chain. Retailers and suppliers are increasingly utilising land or air freight or are simply adding extra weeks to their traditional sea freight schedules. Paul Alger, director of international affairs at the UK Fashion & Textile Association (UKFT), emphasises that the issues manifesting in the Red Sea are undoubtedly affecting some companies, particularly with respect to their ordering strategies for the crucial year-end quarter. Despite anticipations of demand, the UK market exhibits a notable degree of caution, compelling retailers to adopt conservative stock-holding practices.
According to Drewry’s World Container Index, there has been a 4% escalation in shipping charges across eight principal routes from Shanghai, with prices reaching $4,226 (£3,310) per 40ft container by the close of May 30. A footwear supplier, speaking with Drapers, highlighted the substantial tripling of shipping rates in the preceding six weeks. The rising costs, attributed to ongoing Red Sea disruptions, are compounded by shipping lines withdrawing vessels from service, a tactic seemingly designed to inflate prices further. The supplier warns that these elevated charges are likely to filter down to consumers, influencing autumn/winter 2024 pricing.
Steve Sinclair, head of global imports at The Regatta Group, supports this assertion, noting that shipping rate inflation could render retail prices steeper. Given the industry’s recent emergence from an inflationary period, the prospect of further cost surges is concerning. Sinclair projects that current shipping timelines and costs are unlikely to improve before September, with the status quo persisting throughout the year. This situation has led some companies to resort to rail, once deemed cost-prohibitive, as a feasible alternative to sea freight.
Andrew Pace, director at Panda Sourcing, acknowledges the necessity for protracted delivery times, adjusting from a six-week lead time to an eight-week one. He forecasts an extended timeframe of up to ten weeks by spring 2025, a projection propelled by persistent delays and limited container availability. James Lakeland of a womenswear label echoes this sentiment, detailing a delayed order of kaftans, intended for March but arriving in late May. Subsequent delays have necessitated the cancellation of other orders, pushing companies to adapt swiftly by sourcing from locations such as Italy, where costs remain comparatively stable despite shipping upheavals.
The geopolitical tensions in the Red Sea are currently reshaping the global shipping landscape, with consequent impacts on cost and logistics for various industries.
