Risks in Red Sea Disrupt Suez Canal Shipping

Attacks on vessels in the Red Sea by Iran-backed Houthi militia have caused companies to either re-route their shipment around Suez Canal or consider air freight.

Since most of Target’s products come from China and are shipped across the Pacific Ocean to ports in the West Coast, the impacts of the Suez disruption on its operations are not as severe. Companies such as Tesla and Volvo have had to suspend production due to component shortages.

Video Spotlight:  

This post is based on the Reuters article, Target seeing some disruption of India supplies due to Red Sea crisis, by Siddharth Cavale, January 16, 2024; Hapag-Lloyd’s FAQ for the Red Sea Situation, updated Feb 2, 2024; and the YouTube video in the spotlight.  Image source: Shafiqul Alam/Alamy Stock Photo

Discussion Questions:

1. What caused shipment disruptions for Target?

Guidance: Target faced delays in receiving apparel shipments from India and Pakistan because of attacks on vessels in the Red Sea by Iran-backed Houthi militia interrupting the Suez Canal shipping routes.

2. What are the impacts of the Suez disruptions on company operations?

Guidance: Companies need to find alternative shipping routes around the Suez Canal.  The re-routing adds 10-15 days transits time resulting in shipment delays and inventory shortages.

3. What solutions are being sought by companies impacted most by the Suez disruptions?

Guidance: Retailers are stocking up goods and seeking alternative modes of transportation such as rail and air to avoid empty shelves.  Manufacturers may have to suspend production due to component shortages.

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