There is no quick fix for trade disruption being caused by turmoil in the Red Sea and its catastrophic effects on world trade, warns Godwin Xerri, managing director of leading maritime firm Focal Maritime. With the situation in this major trade passageway is intrinsically linked with conflict in the Middle East, shipping firms are bracing themselves for a prolonged period of disturbance to shipping flows.
International shipping lines have been forced to redirect their vessels after a number of them, including the Rubymar, the MSC Sky II and True Confidence were hit by missiles, with the latter even resulting in the death of at least three crew members. The vessel was en route from China to Jeddah and Aqaba, carrying a cargo of steel products and trucks.
Indicative figures show that before October 2023, prior to the Houthi attacks on ships, approximately 52 ships transited the Suez Canal daily in both directions, carrying an average of 330,000 tons of cargo. However, the current daily average has decreased to 35 ships per day, marking a 33 per cent drop.
Xerri notes how Malta, being in a strategic location namely on the route of the main sea route between Suez Canal and Gibraltar, makes it particularly vulnerable to this disruption in sea trade.
“Considering that these ships are sailing by Malta, it is realistic to assume that some of these vessels would have either called in Malta for cargo operations or else stopped off Malta for bunkers and supplies. The bunkering industry in Malta is understood to be the hardest hit,” he explains.
While some ships are taking the longer route via the Cape of Good Hope, at times, such ships bypass the Mediterranean completely and proceed directly to other destinations in North Europe. When vessels are carrying Malta bound cargoes, they still have to call, but with a much longer transit time.
Disruption in the Red Sea adds a further challenge to the shipping industry
Consumers are being penalised through higher costs, whereas importers and exporters need to keep the supermarket shelves full. Xerri explains that changing sources of products is not that a simple matter, not only from a financial point of view, but also from the side of supply, consumer support and marketing.
Disruption in the Red Sea adds a further challenge to the shipping industry which is already bracing itself for the impact of the EU-wide Emissions Trading Scheme (ETS), imposed on shipping lines calling at EU ports. This also spells concern for the manufacturing industry which relies on shipping both for the import of raw materials as well as for the export of finished products.
Questioned to whether the company has taken any mitigating efforts, Xerri explains that Focal Maritime’s client-driven approach means that it immediately sought to address such adversity and sought to identify remedial action. “It is in our interest to assist the client and find different solutions which can give a cheaper method of transport to the clients. We also engage directly with shipping companies to give special consideration to the Malta trade which due to its limitations, in terms of volume, suffers from lack of economies of scale,” he explains.
Despite the maritime industry’s best efforts, there is only so much one can do about the geo-political conflict in the Middle East, calling instead on European lawmakers to reconsider the impact of the ETS Schemes.
“What is happening in the Middle East is an aberration to civilisation, but unfortunately, we cannot see it coming to a peaceful end very soon. Instead, we should focus on things which are within our control, and I strongly urge European authorities to carefully reconsider the ETS scheme, which, apart from the impact on freight levels, has much more serious implications for the connectivity of Malta with its import and export markets,” concludes Xerri.