Supply Chain Disruption Possible Due to Red Sea Attacks

Supply Chain Disruption Possible Due to Red Sea Attacks

Crude and oil products market players said the extent of the impact will be determined by the duration of shipping disruptions as a result of the Houthi attacks.

It is unlikely that much will change unless situation goes on for longer than a couple of weeks, an analyst at a trading house said.

The delays are most likely to impact medium sour crudes from Middle East producers, which could be substituted with grades of similar quality from Brazil, Guyana and Norway, a crude trader told Reuters.

LNG market players believe LNG trade is likely to be largely unaffected and any disruption would not have a massive impact on global supply.

QatarEnergy, the world’s second-largest exporter of liquefied natural gas, has stopped sending tankers via the Red Sea, joining several other companies currently avoiding the world’s main East-West trade route.

Yemen’s Iran-backed Houthi group has since November been attacking vessels in the Red Sea, part of a route that accounts for about 12% of the world’s shipping traffic, in what they say is an effort to support Palestinians in the war with Israel.

Neal Johnston, EY Ireland Supply Chain & Operations Business Consulting Partner says

“The ongoing attacks on shipping in the Red Sea are impacting the global supply chain, causing delays and concerns for businesses who use the Suez Canal, one of the most important sea routes globally through which c.15% of all global trade passes through.

“Businesses here in Ireland have been reporting delayed or missed delivery windows, while some have made tactical decisions to postpone their shipments for a short period.  More broadly, some of our clients have expressed concerns about the possibility of shipping lines diverting their vessels away from the region, which would have significant implications for delivery timeframes and costs.

“While it does not appear that this will escalate to the scale of impact of the Ever Given Suez Canal blockage in 2021, this remains a highly volatile situation that could rapidly intensify. From a supply chain perspective, the sooner this issue is resolved the better as the longer it continues the greater the impact that will be felt by Irish consumers and businesses.”