Representatives of the Ansarullah movement, known as Houthis, and the attacks they have launched on Red Sea shipping have raised concerns about security at sea. The safety of Russian and Chinese vessels is reported to be safeguarded. Yet, if the disruption persists, there could be consequences for Russian imports.
For products with a long shelf life, suppliers in India, Sri Lanka and Kenya are exploring alternate logistics routes that bypass Africa. This shift may extend delivery times but should not necessarily reduce the availability of goods on store shelves, according to Igor Karavaev, who chairs the board of the Association of Retail Trade Companies. He spoke with socialbites.ca about these potential changes in supply chains.
Bloomberg reports that more than 500 container ships carrying everything from clothing to toys to auto parts, which usually travel through the Red Sea to the Suez Canal and back, are now facing routes that add two weeks by skirting the Cape of Good Hope at the southern tip of Africa. Vessels taking the alternative path are currently booked through the summer months.
Karavaev notes that AKORT member retail chains, representing over 65,000 grocery stores across Russia, are not recording disruptions in the supply of imported goods at present. He points out that diversified flows open opportunities for shipments from alternative ports, while the overall supply situation and the need for additional measures will hinge on how long the regional crisis lasts.
According to the AKORT president, retail chains have built up ample stocks across all categories. Karavaev added that consumer demand remains stable and predictable, and the supply of fresh goods such as vegetables, fruits, dairy products, meat, seafood and medicines in Russian stores is balanced. He stressed that these conditions were achieved through ongoing collaboration with various suppliers and can be renewed quickly if needed.
What will be more expensive
Economists from the Russian Economic University explain that Russia imports a range of products from India, including tea, coffee, rice, seafood, medicines, textiles and footwear. Tea, coffee, fruit and nuts come mainly from Kenya, while Sri Lanka supplies textiles, including clothing, rubber and fish products. Vietnam contributes tea and coffee as well as textiles, and Turkey supplies tea and textiles. A large portion of goods are sourced from China as well.
On January 19, Ramaz Chanturia, president of the Roschaykofe association, forecast higher prices for tea and coffee if the Red Sea conflict continues. Yuri Shedko, a professor of economics at the Finance University under the Government of the Russian Federation, assessed that imported goods could become pricier in the next four to five months but that reserves remain sufficient for now, including tea and coffee.
Shedko warned that if the situation does not improve within two months, the cost of delivering imported goods could rise by 50 to 100 percent, potentially pushing retail prices beyond a ten percent increase. Novikova also anticipates price hikes, noting that Russia and India have been exploring Vladivostok as a faster, more efficient route for trade. If the crisis continues, the price of goods arriving from Delhi to Moscow might climb by ten to fifteen percent initially.
Looking ahead, experts believe the situation may gradually ease, and consumer costs could level off or even decline. The Vladivostok port has emerged as an alternative route for shipments from Vietnam to Russia, supporting greater logistical flexibility.
Overall, the Red Sea disruption imposes additional costs and longer transport times for shipments worldwide, increasing prices in many markets. Some analysts see opportunities for Russia to redirect other countries’ supply chains and bolster domestic transportation corridors as a way to capitalize on the disruption.
What’s happening in the Red Sea
Bloomberg notes that missile strikes, drone attacks and the hijacking of civilian ships in the Red Sea are pushing up costs for shippers in Asia and North America. The region now accounts for a substantial portion of global container shipping capacity, according to the digital logistics platform involved in the analysis.
The price of moving containers from China to the Mediterranean has surged, rising from around $1,000 to more than $4,000. Insurance costs for ships have also increased, now reaching roughly 1 percent of a vessel’s value. For a vessel valued at about $100 million, insurance could amount to about $1 million.
Shipowners indicated that the turmoil may persist for months. Some major manufacturers and retailers have faced production adjustments in Europe due to difficulties securing parts from Asian suppliers. Large retailers in Europe have acknowledged that costs will rise. Maersk, one of the world’s leading container carriers, warned that the disruption could last for several months.
The longer these shocks persist, the greater the potential economic impact. While there are no clear signs of inflation accelerating yet from higher shipping costs, central banks are warning of the risks involved.
Earlier reports suggested the Red Sea situation could disrupt food supplies, including fruit and coffee, to the European Union. This scenario implies tighter supplies and higher prices. Analysts note that changing shipping routes will inevitably affect final consumer prices in Europe, with longer delivery times potentially leading to some products arriving late or damaged in transit.