The Red Sea Crisis continues to wreak havoc with global timber supply chains with traders continuing to grapple with surging container costs and a new squeeze on the global port system, with the backlog causing massive congestion in the Middle East, Asia, and Africa.
Yesterday, James Latham, one of the UK’s largest timber merchants, reported that the crisis—which has seen the world’s largest shipping companies reroute $200 billion worth of trade around the Cape of Good Hope—led to profits being slashed by 30% for the 12-months to March 31.
In a statement provided to the London Stock Exchange, according to James Latham: “The cost prices from the majority of our manufacturers, excluding (Red Sea impacted) freight costs, are relatively stable,” but “we are very mindful of the uncertainties created by the current geopolitical instability and the upcoming UK general election.”
It comes as China’s ambassador to the United Nations pushed for a lasting cease-fire in Gaza, stressing that the Red Sea crisis is a spillover of the Gaza conflict: “The current tension in the Red Sea is one of the manifestations of the spillover of the Gaza conflict,” according to Geng Shuang, China’s deputy permanent representative to the United Nations.
“An immediate and lasting cease-fire in Gaza will help cool down the situation in Yemen and the Red Sea,” Mr Shuang said, adding that the bottleneck has had dire impacts on the supply chain for bulk products—including timber—responsible for 10% of global trade, including 40% of Asia-European trade.
According to the World’s Top Exports, the crisis has impacted the US by up to $50.8 billion of sawn wood, with China among the most affected. The big six—including China, Canada, Russia, Sweden, Germany, and the US—are responsible for over 70% of exported timber that widely uses the seaway; however, the impacts are being felt wider, with Australian-bound timber tied up in the bottleneck.
Earlier this month, Maersk, the world’s second-largest container company by fleet size, said trading conditions remained subject to “higher than normal volatility” given the unpredictability of the Red Sea situation and the lack of clarity on future supply and demand. The crisis is now adding 2-3 weeks to shipping times, costing up to US $1 million a week in fuel.
More than 100 freight companies, including CMA CGM, Hapag-Lloyd, Evergreen, and oil giant BP, have stopped movements through a channel. At the same time, insurance premiums for those brave enough to use the Red Sea shot up nearly tenfold since the attacks began.
The impact has been significant, particularly in China, India, Vietnam, Thailand, Indonesia and European countries, including the United Kingdom, Germany, France, Spain and Italy – where a surge in timber cargo has used the passage to enter European markets via China and the ASEAN region.
- For more information, visit Wood Central’s special feature on the Red Sea Crisia and its impact on global timber supply chains.
