In early December global freight companies including MSC, Hapag-Lloyd and CMA CGM Group reported attacks on their vessels. 

Following these attacks, several shipping companies rerouted ships from the Suez Canal and Red Sea, opting instead to redirect their vessels around the Cape of Good Hope.

A report published by financial services company BofA Securities has outlined the ongoing potential impacts of the Red Sea crisis, labelling the supply chain disruption as “slow movement” of goods. The company explained the availability and order flow should normalise relatively quickly because ships and containers are being detoured rather than cancelled, however this means it will take longer and increase costs.

Why the Red Sea is essential for the global fashion supply chain 

On 30 January, the US Coast Guard and Maritime Transportation Subcommittee chairman Daniel Webster presided over a hearing that underscored the importance of the Red Sea shipping corridor for global maritime commerce. He explained the Suez Canal, which connects Europe and Asia represents nearly 20% of container traffic and a significant portion of oil and liquified natural gas shipments.

He continued: “To date, dozens of vessels have been targeted, either through hijacking, attempted hijacking, or missile and drone strikes — putting ships and their crews at risk. On 18 December, the US announced the establishment of Operation Prosperity Guardian, a multinational security initiative to support maritime commerce transiting through the Red Sea, and on 12 January, the United States Navy, in conjunction with coalition partners, began air strikes in an effort to degrade the Houthi’s ability to strike maritime targets.”

In response to these threats, Webster noted that carriers rerouted ships around Africa, leading to insurance costs skyrocketing, increased container rates and longer transit times for goods to arrive at their destinations.

However, he pointed out the problem does not end here. 

He highlighted these disruptions in the Red Sea are occurring at the same time as the Panama Canal faces bottlenecks due to low water levels, forcing canal authorities to reduce transits by half. This compounds the uncertainties faced by ocean carriers and shippers, he added.

Webster emphasised the profound impact on the supply chain during the pandemic era, illustrating how supply chain crises can disrupt the global economy. He also stressed the importance of preventing their recurrence.

At the same hearing, National Retail Federation (NRF) vice president of supply chain and customs policy, Jonathan Gold, testified on behalf of the retail industry the ongoing impact of vessel diversions away from the Red Sea. He addressed concerns regarding increased rates and fees; potential congestion at US ports; and outlined risk mitigation strategies implemented by retailers.

Gold said in his testimony: “Having a safe, efficient, predictable and timely supply chain is critical to the success of any retailer. The ability to ensure that products are available for the consumer, whether they shop in-store or online, is key to the retail supply chain.

“While the overall volume of US trade that transits the Suez Canal is only about 12%, the impacts of the disruptions are being felt far and wide. The biggest challenge for retailers posed by the ongoing disruptions is the additional volatility, cost, uncertainty and overall risk to the supply chain. Once again, retailers and other shippers are being forced to readjust their supply chains to ensure product delivery.”

He emphasised the critical need to tackle these issues, highlighting that the longer these attacks and disruptions continue, the more challenges will be created and cause congestion in the coming months.

Understanding the trade disruptions to both the US and Europe’s fashion supply chain 

According to the US’ Global Port Tracker report released on 8 January by the NRF and Hackett Associates, there was a “traditional” slowdown in US imports post the bustling holiday season but the recent attacks in the Red Sea caused trade disruptions, leading to prolonged transit times and increased costs.

At that time, Gold said: “There’s always a new challenge on the horizon. Attacks on cargo ships in the Red Sea have been in the headlines and the disruptions caused by those attacks have once again created volatility in retail supply chains. Retailers are working with their carrier partners on mitigation strategies to limit the impact, but we are seeing longer transit times and increased costs as a result.”

While, Hackett Associates founder Ben Hackett pointed out that any effect from the Red Sea attacks would most likely come at East Coast ports.

Hackett explained: “The number of containers arriving at East Coast ports should not be directly affected if carriers add ships to maintain capacity, but shippers will have to adjust their supply chains to cope with longer transit time. We may see an increase of Asian cargo arriving at West Coast ports and then shipped east via intermodal rail, but doing so is costly and does not save that much time.”

He noted that as would be expected, carriers are passing on the additional voyage costs and then some.

The British Retail Consortium (BRC) echoed similar concerns for the UK, cautioning that 2024 poses further challenges for retailers and consumers, with spending expected to be strained by high living costs. This, it added, will be compounded by other emerging issues, such as the disruption to shipments from the Far East via the Red Sea.

GlobalData’s retail analyst Neil Saunders told Just Style that apart from the increased voyage time for ships and consequent costs, the Red Sea situation also puts pressure on the shipping network as it means vessels and containers are not in the right place when needed, which is further pushing up shipping rates.

He added: “Given retailers know this is an issue, they can probably plan to mitigate the timing problems, but it is harder to avoid the cost implications. Some retailers are looking at alternatives, such as air freight, for time sensitive merchandise – but this comes with big costs attached. Moreover, since the problems are political rather than health related, which was the case during the pandemic, they could be resolved quite suddenly. Or they could escalate further.”

Saunders warned fashion retailers and those working within the fashion supply chain should be prepared for both eventualities.

Air cargo rates experienced a surcharge for shipments from China in the pre-Chinese New Year period, according to figures shared by WorldACD Weekly Air Cargo Trends. Although, it said there’s no clarity as to whether this boost in demand stemmed from disruptions and delays in container shipping along the Red Sea, which have reportedly led to some conversion from China-Europe sea freight to sea-air shipments.

How the Red Sea crisis is impacting the fashion supply chain, brands and retailers 

The currents of the “proxy war” in the Red Sea can be seen throughout the fashion supply chain with several fashion brands and retailers attributing a rise in costs, delayed shipments and reduced revenue to the ongoing crisis.

On 8 February, the American Apparel & Footwear Association (AAFA) and the International Apparel Federation (IAF) issued a joint letter with over 100 signatories calling for greater government support in ensuring the safety and accessibility of shipping routes amid the Red Sea crisis.

The letter explained the consequences of these attacks extend beyond immediate financial losses such as route changes which are causing port congestion; equipment shortages; and soaring shipping rates across the globe, all of which create inflationary impacts.

It added even shipping lanes on the other side of the world from the Red Sea are beginning to be adversely affected.

The signatories underscored the ripple effects in cost and capacity issues for the industries that depend upon safe and secure maritime commerce as incalculable, particularly since global transportation is already strained from reduced access to the drought-ridden Panama Canal.

Patrick Lepperhoff, principal at Inverto, a European supply chain management company affiliated with the Boston Consulting Group, noted the fashion industry will continue to see delivery delays due to the Red Sea crisis.

The supply chain expert also raised concerns about freight carriers exploiting the crisis to boost their profits. Despite factors such as heightened insurance and fuel costs driving up rates, Lepperhoff advised importers to stay vigilant, monitor shipping market rates closely, and be prepared to negotiate or consider alternative options.

Retailers are said to be mitigating the impact of cost increases and seeking to prevent stock shortages by reducing the amount of discounted items.

Delays to shipments could prove a problem for some fashion retailers with British clothing brand Next admitting that if difficulties with access to the Suez Canal continue it could cause some delays to its stock deliveries. 

However, for others the impact appears to be minimal thus far with Swedish fashion retailer H&M telling Just Style the crisis is having no major impact on its operations and German sports giant adidas stating it had no major developments to share from the crisis.

From a fashion supply chain point of view the ongoing crisis could have the potential to lead to longer-term shifts in fashion sourcing as well as logistics. 

Navdeep Sodhi, a partner at Switzerland-based consultancy Gherzi Textil Organisation told Just Style the crisis “should be a clarion call for renewed efforts towards diversification of sourcing, including an evaluation of reshoring and nearshoring”.

Meanwhile, Dr Sheng Lu, associate professor in the Department of Fashion and Apparel Studies at the University of Delaware, believes the ongoing disruptions could further exacerbate the already challenging landscape of rising sourcing and raw material costs for many EU-based textile and apparel manufacturers and brands.

He warned: “The recent attacks on ships in the Red Sea are very concerning to the fashion industry, which depends on global trade. Notably, the Suez Canal is a key route for vessels traversing between Asia and Europe. This implies that the resulting shipping disruptions could impact millions of daily EU apparel imports from Asia, with limited practical alternatives at least in the short term.”