Mastering challenges in the Red Sea

Line Up informs: Logistical developments and challenges in the Red Sea

As a procurement company, we at Line Up feel responsible for informing our customers and interested parties about the latest developments in the logistics and procurement industry. Currently, the most important news in the industry concerns the Red Sea. The Red Sea is a crucial waterway that is not only important for the surrounding countries, but also for the global economy. It connects the Indian Ocean to the Mediterranean Sea via the Suez Canal, one of the world's most important trade routes linking Asia and Europe. Recently, however, the security situation in the Red Sea has changed dramatically, causing significant disruption to global trade.

Definition and background of the Huthi movement

The Huthi are a militant movement in Yemen that have carried out uprisings against the Sunni leadership in the capital Sanaa in recent decades. This movement has evolved from a local conflict into a major player in regional politics that now threatens security and stability far beyond Yemen's borders. The attacks are aimed at ruling the whole of Yemen and gaining recognition, in particular by attacking any ship heading to or coming from Israeli ports.

Current situation and international measures in the Red Sea

Recently, the Houthi rebels have intensified their attacks on merchant ships in the Red Sea, which has a direct impact on the Suez Canal and the associated trade routes. These attacks have resulted in ships having to take significant detours, often more than 6,000 km via the Cape of Good Hope, leading to delivery delays of almost three weeks and increased transportation costs. This situation affects numerous product areas, from pharmaceutical products to consumer goods.

The following chart from Statista shows the 82% decline in the number of containers in the period from December 2023 to February 2024. This can also be used to measure the severity of the situation.

One specific, recent incident was the attack on the merchant ship Rubimar, which was carrying fertilizer. This led to an oil slick 29 km long, a direct result of the spreading pollution in the sea. In response to the growing threat, the USA and 20 other countries have formed a protection force to secure merchant ships in the Red Sea and fend off direct attacks on Israel.

Consequences for global trade and logistics

The attacks by the Houthi rebels have led to an unprecedented increase in transportation costs. The cost per container from China to the Mediterranean has risen sharply since November last year, but is still below the level of the coronavirus crisis, when the figure was just under USD 20,000 per container. If further disruptions occur in addition to the Houthi attacks, supply chains could be interrupted and shipping companies could reach their capacity limits. Experts warn that without a solution to this crisis, the attacks and their impact will continue to severely affect the global economy.

Stable global logistics despite the Red Sea: future prospects

The Container Throughput Index measures the number of containers handled in ports worldwide and serves as an indicator of trade activity and the efficiency of global logistics networks. There is a positive trend in the global Container Throughput Index until December 2023, reflecting a stable global logistics industry despite challenges such as the Huthi attacks in the Red Sea. This positive trend suggests that global trade remains resilient and is able to adapt effectively to geopolitical tensions. Nevertheless, the situation in the Red Sea remains volatile, with little sign of calming down quickly. Experts fear that the security situation could worsen and it could take up to a year for the overall situation to calm down. Going forward, international cooperation is crucial to ensure security in the Red Sea and stabilize global trade. It is important that all stakeholders work together to find a lasting solution for the region.

Line Up's response to the situation in the Red Sea

In response to the situation in the Red Sea, we at Line Up have taken decisive measures to act as a reliable partner for our customers:

1. Transparency: Through our Supply Chain Dashboard, we provide customers with real-time updates on their shipments to enable informed planning.

2. Communication: We keep the dialog with our customers open, inform them about possible delays and work on individual solutions.

3. Adaptation and research: Internally, we have adapted our processes to intensify research into the situation so that we can react proactively to changes.

Line Up is committed to acting transparently, communicatively and proactively, even in challenging times, in order to best meet the needs of our customers.