Factories grind to a halt as Red Sea attacks create trade bottlenecks

Houthi rebel attacks on cargo ships in the Red Sea are causing disruptions and driving up costs in global trade.

Car factories have idled in Belgium and Germany. Spring fashion lines are delayed at a popular British department store. A Maryland company that makes hospital supplies does not know when to expect parts from Asia.

Attacks on ships in the Red Sea are delivering another shock to global trade, coming on top of pandemic-related logjams at ports and Russia’s invasion of Ukraine.

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Houthi rebels in Yemen, seeking to stop Israel’s offensive against Hamas in Gaza, are attacking cargo ships plying the waters connecting Asia with Europe and the U.S., forcing traffic away from the Suez Canal and around the tip of Africa. The disruption is causing delays and driving up costs — at a time when the world has yet to vanquish a resurgence of inflation.

“What has happened right now is short-term chaos, and chaos leads to increased costs,” said Ryan Petersen, CEO of supply chain management company Flexport. “Every ship that gets rerouted has 10,000 containers on it. It is a lot of emails and phone calls getting made to replan each of those container journeys.” Adding to the bedlam in global shipping is what Mr. Petersen calls a “double whammy”: Passage through another crucial trade corridor — the Panama Canal — is restricted by low water levels caused by drought. And shippers are in a rush to move goods before Chinese factories shut down for the February 10-17 Lunar New Year holiday.

The threat grows considerably the longer the war in Gaza drags on. Disruption to Red Sea trade lasting a year could surge goods inflation by up to 2%, Mr. Petersen says, piling on pain while the world already struggles with higher prices for groceries, rent and more. That also could mean even higher interest rates, which have weakened economies.

For now, Man and Machine in Greater Landover, Maryland, is awaiting a shipment from Taiwan and China. It has been one setback after another for the company, which makes washable keyboards and accessories for hospitals and other customers.