After Denmark's Maersk, the world's largest shipping company, announced Friday evening that it was suspending the passage of all its ships through the Bab el-Mandeb Strait, the Suez Canal and the Red Sea following a series of attacks on ships belonging to Yemen's Houthi rebels, Israel believes that the move will lead to delays in shipments – and of course to higher prices.
"In the past two months, there has been a serious traffic jam here," said Yaron Ben-Eli, CEO of Walla! Shoppes and former CEO of U Shops, "It started with a lack of flights to Israel, which created a situation in which online shopping abroad, with an emphasis on shopping from the US and China, is greatly delayed, to levels of three and four times the usual time. Ali Express is also in serious trouble, and their delivery times have extended to a month or more."
According to him, there are packages ordered about a month ago from China that have not yet left the country: "As far as the US is concerned, there are almost no flights to Israel, so the e-commerce either does not leave Israel or makes the rounds through Europe, which causes very long delivery times. Now the crisis is also reaching the sea, it will undoubtedly cause shortages here and price increases on existing inventory, since when a company of this size takes such a step, it will also drag others after it."
The Houthi rebels' naval force in action in the Red Sea, yesterday
Ben-Eli added that ships usually transport high-volume goods, vehicles and raw materials, so the lack of a flowing supply of these could cause prices to rise by 5-10% in electrical products, vehicles and raw materials for local production. "I see an increase in demand for purchases in Israel, both because of the support for local businesses due to the war and because of lack of supply or long delivery times from abroad. The beginning of 2024 will bring with it serious challenges of inventory shortages, and even price increases."
"The impact will be immediate"
Adam Friedler, CEO of Good Pharm, said similarly: "The move will have no small significance and will significantly increase transportation prices, especially from the Far East. Accordingly, products produced in the East can be greatly affected in terms of their price. The cheaper and more volumetric the product, the more significant the price of transportation affects the price of the product to the end consumer."
Houthi rebels on a motorboat in the Red Sea (archive), photo: AP
Gal Shaham, vice president of international shipping at the UPS franchise in Israel, noted that the company has begun to see the impact of the attacks in recent weeks, after pressure was created on shipping companies. "The impact will be immediate. Once we will feel a delay in the goods on the ships of Maersk that were damaged, and again at higher costs. There is already about a 30% increase in shipping from China and additional war fees," he said.
The significance of the move, in his opinion, is that all shipping companies will not directly visit Israel, which they will reach via other ports, which will increase prices and arrival times by about 20 days, which in turn will affect the pockets of the Israeli consumer. It is important to note that the entire supply chain will feel the impact, including the end consumer.
"Maersk's decision is a direct continuation of the pressure, which proves that this is a global problem that requires a global response," he said. "However, the state also has options for action. It is important to reassure shipping companies around the world, to enter negotiations with them so that they do not stop coming to Israel, and to help finance additional costs so that the harm to the consumer will be as low as possible."
Houthi security forces member in the background of a ship in the Red Sea (archive), photo: AP
Chen Herzog, chief economist of BDO, a consulting firm, says that the significance of the decision will lead to a delay of about 30 days in the delivery times of sea freight to Israel – and also to an increase in transportation costs. "The volume of maritime trade to Israel from the Far East reaches about NIS 80 billion a year, but from Israel's point of view, the Maersk announcement is the least bad alternative. The worse alternative for us would be a situation in which Maersk decides to take Israel off its route from east to west, and skips the stop at the country's ports," he noted.
"Maersk has reached the conclusion that the risk of crossing Bab el-Mandeb strings is high even for shipments that are not destined for Israel. In the current situation, there is a negative impact on transportation costs from the East to all of Europe, and not only to Israel – this is actually a problem that will lead to higher prices for all European countries," he said. "This could result in damage on the order of NIS 700 million a month in the form of an increase in the price of products that arrive by sea transport from the east to Israel."
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