Belize-flagged cargo ship Rubymar, damaged in a February 19 missile strike claimed by the Houthi rebels, sinks in the Red Sea. (Credit: AFP via Getty Images)
BEIRUT —The Iran-backed Houthi military group in Yemen on Monday threatened to escalate assaults on shipping in the Red Sea during Ramadan, with experts anticipating resulting price increases of imported goods, including two to 15 percent inflation on foodstuffs arriving in Lebanon.
For more than three months now, Houthi fighters have been attacking commercial and military ships in international waters, purportedly in response to Israel’s war on Gaza.
The attacks have sent shockwaves across the maritime industry, endangering maritime security and disrupting the flow of trade along one of the world's most critical shipping corridors.
That includes trade to Lebanon, too.
Egypt’s Suez Canal and the Red Sea serve as crucial arteries for global trade, facilitating the movement of goods between Europe and Asia.
Lebanon, heavily reliant on imports and sea trade for hydrocarbons, food, vehicles, machinery and more, secures trade needs to and from many Asian countries, through regular global sea shipping lines with container ships passing through the Red Sea and the Suez Canal, explained Elie Zakhour, First Vice President of the Arab Federation of Chambers of Shipping and former head of the International Chamber of Navigation in Beirut.
The country finds itself directly impacted by the latest waterway disruptions, as Lebanon relies on sea freight because it's cheaper than air freight fees, Zakhour pointed out, explaining that the cost of sea freight is calculated in tons or per container that holds more than 25 tons, while the cost of air freight is calculated in kilograms.
Merchants can load more than 200,000 tons on a ship, while the maximum load of the aircraft is 450 tons, Zakhour added.
The threat posed by Houthi attacks has prompted several international carriers to suspend travel along these routes and transit their fleet around South Africa’s Cape of Good Hope, adding thousands of miles to journeys and leading to significant delays in shipment arrivals.
In Lebanon, those delays are substantial with journeys now taking 20 to 25 percent longer, Omar Itani, General Director of the Beirut port, told L’Orient Today.
A shipment carrying Ramadan goods, for example, was supposed to arrive on February 15, but is now expected to arrive mid-Ramadan, said Hani Bohsali, President of the Syndicate of Food Importers.
What’s more, during Ramadan and Lent, which are observed in Lebanon today, “demand usually increases for some food items, which we may not be able to secure from other countries or find other alternatives for,” Bohsali said.
Rise in prices
The extended journey duration and increased fuel consumption contribute to higher overall trip costs, Zakhour points out.
Shipping companies have responded by raising rates, “with the cost of shipping one container, for example, doubling from $2,000 to over $4,000, and even reaching $5,000 for a 20-foot container imported from China, Korea or Japan…,” according to Bohsali.
Meanwhile, the escalation of military tensions in the Red Sea has prompted insurance companies to raise premiums “against war risks from 0.1 percent to one percent” for shipping operations, further driving up costs, Zakhour said.
“It is expected to continue rising as Israel continues its war on the Gaza Strip and the military escalation in the Red Sea,” he added.
Itani said that insurance companies have also increased their fees for the shipments taking the African route, “because the trip is longer and comes with different risks.”
Geollect, a geospatial intelligence company, suggests that redirecting maritime traffic opens up vessels to different security risks.
As reported by the maritime security firm Ambrey Analytics, ever since the crisis emerged in the Red Sea, there have been 17 instances of vessels being seized in piracy incidents based in Somalia, with 14 occurring just between December and January.
Just this Wednesday, 20 armed people boarded a cargo ship off the coast of Somalia and took control of it.
These additional costs—higher shipping costs, fuel and insurance fees—will be reflected in a potential increase in the prices of several imports including oil, gas, fuel, and foodstuffs, Zakhour said, adding that this increase varies depending on the value of the goods.
China, which accounted for 13.8 percent of Lebanon’s imports in 2022, or $2.8 billion, stands as Lebanon's top importer, shipping a significant portion of goods through the Suez Canal and the Red Sea.
Lebanese food staples imported from the Far East, typically sold at lower prices, are expected to see price hikes of “up to 15 percent,” according to Bohsali. Those food staples include “rice, grains, beans, canned goods, fish, among many others,” Bohsali said. “Around 70 percent of rice imports come from the Far East—China, Thailand, Pakistan and India. Most of the canned fish come from Thailand and Vietnam.”
Meanwhile, items with fixed shipping costs relative to their value may experience relatively lower price increases, “up to two percent.”
Asked whether these hikes could already be felt in Lebanese markets, Bohsali said, “There is conflicting information about it and none is based on real figures.”
“There will be no [foodstuffs] cut off provided that we are under the same situation where the [Beirut] port and airport remain open,” Bohsali reassures.
Unlike ships arriving in Lebanon from the Far East, those arriving from Europe have not been affected by the Red Sea tensions, says Itani.
Lebanon’s agricultural sector hit hard
Lebanese exports, and more particularly Lebanese agriculture exports, are also affected by the Red Sea troubles, as they heavily rely on the Red Sea route, in light of the Saudi embargo on the land shipping route between it and Lebanon, after its customs uncovered more than 5.3 million Captagon pills hidden in a pomegranate consignment in 2021.
And Saudi Arabia constitutes a transit point for trucks of Lebanese fruits and vegetables to the Gulf countries.
Lebanon exports annually around 250 to 350 tons of agricultural products — citrus fruits, potatoes, and summer fruits, namely to the Gulf countries, Qatar, Bahrain, Muscat, the Emirates, and Kuwait,” said Ibrahim Tarshishi, Head of the Bekaa Farmers Association, stressing that “export is an absolute necessity for farmers as it provides farmers with capital that enables them to continue production.”
The United Arab Emirates tops Lebanon’s export partners’ list, representing 23.3 percent of the total volume of its exports (2022).
With shipments taking significantly longer to reach their destinations, the quality of perishable produce is compromised, potentially leading to significant losses for farmers, Tarshishi adds. Farmers have also been affected by the soaring shipping costs.
But during winter, Lebanon does not export a lot of produce.
“We are sending what is left of our potato, grapes, apple [produce],” Tarshishi said.
“Citrus fruits, that grow abundantly in Lebanon during the winter season, are the exported produce most affected right now.”
However, “we don’t have the big quantities that we need to cry about right now,” he added.
A fact backed by Itani, who said that export shipments are not stuck in Lebanese ports as a result of the delay and that “things are normal.”
“The big disaster in the agricultural sector that we are fearing will start in May — this is when production increases and we export a lot more quantities, compared to today’s,” Tarshishi said.
Several companies in Gulf countries have introduced truck connections like ones from Bahrain to Haifa and Dubai to Haifa, significantly reducing transit times, but Lebanon remains unable to transit goods to the Gulf via land routes due to the Saudi embargo.
“Authorities in Lebanon should quickly intervene and mediate with the Kingdom of Saudi Arabia to allow transit trucks to pass through its territory,” Tarshishi said.