Global Rice News

In a globalized world where geography has become increasingly important, the impact of Israel’s war on Gaza is being felt by businesses and consumers in distant lands. A recent survey of UK exporters revealed that 55% of them are experiencing increased costs and supply chain delays due to the Houthi attacks in the Red Sea, which have disrupted shipping. South Asian exporters have also reported a more than 400% rise in freight charges as shipping lines restrict or halt vessel movement through the Red Sea.

The Red Sea, a crucial interoceanic passage handling 22% of global seaborne container trade, separates Asia from Africa. It significantly reduces the distance between Asia and Europe, saving fuel and time for ships that would otherwise need to circumnavigate the entire African continent. However, since the Houthi attacks on merchant ships passing through the Red Sea, trade flows have been significantly impacted. Counter-strikes by US and UK forces have temporarily reduced intercontinental trade, raising concerns about potential price spikes for certain commodities in 2024.

Pakistan, the world’s 11th largest rice producer, is one of the countries heavily affected by these disruptions. Haseeb Ali Khan, senior vice chairman of the Rice Exporters Association of Pakistan (REAP), explains that freight charges for containers going from Karachi to Europe have skyrocketed from $700 to $3,600, severely impacting their business. Additionally, transit times for Pakistani rice destined for European shores have roughly doubled due to ships having to take the longer route around Africa.

Leading shipping lines such as Maersk and Hapag-Lloyd have diverted their vessels bound for the Red Sea to sail around the Cape of Good Hope, resulting in a significant drop in shipping activity through the Red Sea and a considerable increase in activity around the southern tip of Africa.

The effects of these disruptions are being felt globally. The economies of the Middle East, Europe, Asia, and Africa have all been impacted. The Red Sea trade route is particularly vital for oil exports from the Middle East to Europe and from Russia to Asia.

Moreover, the re-routing of maritime traffic has had negative environmental consequences. Slow steaming, a practice that helps reduce CO2 emissions by reducing vessel speed, has been setback due to the longer distances ships now have to cover, resulting in increased fuel consumption. Consequently, freight costs have steadily risen.

The rise in freight charges is expected to fuel inflation in global economies, impacting the cost of major agricultural commodities. The IMF warns that continued attacks in the Red Sea, along with the ongoing war in Ukraine, pose risks to the global recovery and could lead to increases in food, energy, and transportation costs.

Despite these challenges, there is hope on the horizon. A significant increase in container fleet capacity is expected in 2024, which may help alleviate some of the disruptions caused by the Red Sea crisis. The ordering of 478 container ships, a 41% increase from 2023, will increase capacity by 10%.

In conclusion, the consequences of Israel’s war on Gaza are rippling through the global shipping industry. The disruptions in the Red Sea have led to increased costs, supply chain delays, and environmental setbacks. Countries like Pakistan, a major rice exporter, have been heavily impacted. However, an increase in container fleet capacity in 2024 offers hope for alleviating some of these challenges.

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