Attacks in the Red Sea: a new threat to supply chains. Europe’s sovereignty in question.
Antoine Chacun, Managing director– ODDO BHF Metals.
“The direct economic and strategic stakes involved in closing the Red Sea are low for the United States. […] For Europe, on the other hand, this route is crucial in strategic and economic terms.”
The interruption of most of the traffic on the Red Sea-Suez route following the attacks on merchant ships by the Houthis in Yemen is a major issue for Europe.
Red Sea events as seen by our ODDO BHF Metals business.
Through its non-ferrous metals business – ODDO BHF Metals – (aluminium, copper, zinc, etc.), the Group has been supplying part of the European metal industry since 2006.
For aluminium, as for energy, Russian supplies to Europe were reduced to a minimum (from 30% to less than 10%), while volumes purchased in Asia (Persian Gulf, India, Indonesia, Malaysia, Australia, etc.) grew by more than 30%.
What happened?
On Friday 15 December 2023, two of the world’s largest shipping lines, MAERSK and CMA CGM, announced that they were stopping the transit of their container ships via the Red Sea and Suez. They are reacting to a series of attacks by Yemen’s Houthis on ships bound for the Babel-Mandeb Strait. They will be followed by the major shipping lines HAPAG LOYD and MSC.
Some ships waited at the entrance to the Strait hoping for an improvement, others headed for the Cape of Good Hope, while others unloaded part of their cargo to transfer it to other routes bypassing Africa.
On Saturday 16 December 2023, we received notification from a major Middle Eastern producer that it was withdrawing all its offers for Europe until further notice.
We quickly calculate that 40% of our aluminium supplies transit through the Suez Canal (India, Indonesia, Malaysia, Persian Gulf, Australia, New Zealand).
The following week is used to discuss alternatives with world producers.
The Indian producers decide to continue the flow via Bonne-Espérance immediately. The Saudi Arabian producer raises the possibility of transporting aluminium ingots by road from the shores of the Persian Gulf to Jeddah on the Red Sea in northern Yemen.
Delays lengthened, beyond the extra 10 days needed to circumnavigate Africa, and transport disorganization and transshipments increased delays to a month or more. Subsequently, reloading capacities became insufficient for subsequent shipments. Ships are mobilized for the return trip around Africa. Bulk carriers are mobilized to replace container carriers.
