Fears of prolonged Red Sea shipping crisis fuel inflation fears, as oil, retail cargo delays rise
A screen grab captured from a video shows that cargo ship ‘Galaxy Leader’, co-owned by an Israeli company, being hijacked by Iran-backed Houthis from Yemen in the Red Sea on November 20, 2023. (Photo by Houthis Media Center / Handout /Anadolu via Getty Images)
Anadolu | Anadolu | Getty Images
The ripple effects of the Red Sea diversions have expanded into the energy markets and despite repeated attacks on Houthi rebels by the U.S. and allies, shipping experts say the crisis may linger for months and lead to a cargo container supply crunch.
“So far, it almost seems the Houthi attacks are just increasing,” said Bendik Folden Nyttingnes, a shipping analyst at Clarksons Securities.
In an email to clients, Honour Lane Shipping (HLS) said its carrier contacts are “informally” predicting the Red Sea situation will not be solved for at least six months, and could last up to a year. “If so, we expect the soaring freight rates and equipment shortage will continue till the third quarter,” it advised clients.
Earlier this week, Shell confirmed that its oil tankers are temporarily being rerouted around the Red Sea, with its CEO telling the Wall Street Journal that a 5-10% price impact is anticipated in the short-term.
Kpler’s ship tracking director Jean-Charles Gordon estimates that vessels managed or chartered by Shell that are being rerouted via the Cape of Good Hope can expect an approximate 10-day delay in their estimated time of arrival.
“As several product tanker operators are avoiding the area following the airstrikes on Friday, the longer transit times around the Cape of Good Hope could create a supply shortage of tonnage if the situation continues, which in line could push product tanker rates and stocks higher,” Nyttingnes said.
Torm , Hafnia, Stena Bulk, Hafnia, BP, Frontline, Equinor, Euronav are reportedly among the tanker operators and energy companies choosing to avoid the area following recent warnings. Companies including Tom, Hafnia, Scorpio Tankers and Ardmore would benefit if product tanker rates rose, Nyttingnes said.
These diversions are immediately eating into Egypt’s economy, with its GDP reliant on the Suez Canal, which it owns and operates. The country’s other significant source of revenue, travel, has been decimated because of the Israel-Hamas War.
“If Total Suez Canal tanker transits are over 8 million barrels per day, the losses to the Canal Authority are probably in the range of $5 to $7 million depending on the mix of tankers going through,” said Andy Lipow, president of Lipow Oil Associates.
This would be on top of the revenue lost by diverted container vessels which are required to pay between $500,000-$600,000 per transit. According to Kuehn + Nagel, 90% of container ship traffic bound for the Suez Canal has been rerouted.
50% of all Suez traffic could be rerouted
A drop of 40-50% in all vessel Suez crossings as a result of shipping diversions is possible, according to Ami Daniel, co-founder & CEO of Windward, which could create a situation similar to the Covid supply chain crunch for many retailers reliant on global supply chains.
Logistics CEOs have been warning CNBC that the vessel re-routings would result in container crunches. When vessels are late, the containers on those vessels will be late to be processed and reused again for exports.
Goetz Alebrand, head of ocean freight Americas for DHL Global Forwarding, has been warning about an upcoming container crunch for weeks. “More than 4 million containers (Twenty-Foot Equivalent Units) are bound for longer transit times and will not be ready in the Asia Pacific for the next loading,” he warned. “Considering a two-week delay in either direction it could mean that four million times of containers will be needed to have availability.”
The Asia to Europe route is the most impacted by delays. The ripple effect of this bleeds into the ability of European exports to move out at a fluid rate.
“Europe has felt the most impact from the situation in the Red Sea given it is the major trade route for goods coming from Asia,” said Stephen Schwarz, executive vice president of Wells Fargo global receivables and trade finance. “However, with more ships being diverted and taking alternative, longer routes to Europe, it is starting to impact global capacity. The delay of containers, reduced capacity, and longer transit times all influence global shipping costs which will start to impact U.S. companies the longer the situation in the Red Sea continues.”
Paolo Montrone, global head of trade for Kuehn + Nagel, said the container crunch situation currently unfolding will have a knock-on effect on European exports.
“We anticipate encountering challenges in European terminals as larger ships are expected to arrive outside of their scheduled times. This influx is likely to cause congestion and slowdowns at terminals and ports, subsequently affecting other services such as shipments from Europe to the USA.”
Companies with higher-value items and time-sensitive products are also shifting to the air. “Drawing from past experiences, we foresee an increase in the need for air freight services in the upcoming weeks,” said Montrone.
Alan Baer, CEO of OL USA, said he is expecting the container crunch to impact Asia as well.
“Recently carriers reduced the amount of free time on import containers to help expedite the return of equipment back to Asia,” said Baer. “However, given the longer transit times vessels are experiencing, the market may face a shortage of empties across Asia until sailings normalize.”
U.S. retailers say they are prepared
The delays of vessels during the pandemic had some retailers like Home Depot, Costco, and Walmart hiring charters to speed up deliveries.
Evelyn Fornes, Home Depot spokeswoman, said it is working with logistics carriers to find alternate routes to limit any impact from the Red Sea conflict.
“As a regular course of business, we always have plans in place for potential disruptions to any of our partners,” Fornes wrote in an email. “We have a large and diverse supply chain with a number of partners, so we’re accustomed to being flexible and agile when there are disruptions. This type of flexibility is what allowed us to adapt and move the unprecedented volumes during the pandemic, despite significant disruptions.”
“Target remains confident in our ability to get guests the products they want and need,” a Target spokesman said via email. “We leverage production and transportation partners across the globe, and the majority of our freight does not travel through the Suez Canal. For any freight that’s being routed around the Suez Canal, we’re working with shipping partners on alternative paths.”
While retailers are expressing confidence, Tesla, Volvo, and Michelin have recently said they have had to halt manufacturing. Ikea has warned of delays of product, as well as British retailer Next and Crocs.
Costco and Walmart did not respond to requests for comment.
East Coast freight rates soar
While freight rates for U.S. West Coast ports have yet to spike, freight rates for the East Coast and Gulf are up. U.S. East Coast rates are between $5,900-$6,700 for a forty-foot container, and rates for the Gulf are between $6,300-$6,900 a 40-foot container, according to Honour Lane.
To avoid delays and fees, some logistics companies are re-routing to the U.S. West Coast, which could result in higher rates eventually.
“U.S. West Coast space is also getting tight as a substantial number of boxes destined for U.S. East Coast /Gulf destinations are being re-routed through U.S. West Coast hubs,” wrote HLS. “Some big beneficial cargo owners like Walmart have proposed to increase their allocation to the U.S. West Coast and reduce allocation to U.S. East Coast.”
The rates for East Coast and Gulf Coast containers are expected to go up even more. In an advisory to clients Tuesday, MSC alerted of both general rate increases and peak season increases starting February 12 for import containers from the Middle East/Indian Sub-Continent to U.S. East Coast, Gulf Coast and San Juan.
Refrigerated containers called “Reefers” and dry containers, both 20-foot and 40-foot, will be charged a $2,200 peak season charge per container plus a $1,000 general rate increase (GRI) per container. This is on top of whatever container fee the shipper pays.
Some carriers are reportedly planning to deploy more capacity to West Coast for the next contract year, HLS says.
“As the rate difference and transit time difference between U.S. East Coast routings and U.S. West Coast routings are both increasing, the conditions are satisfied for carriers to launch premium services to guarantee space and equipment, which is not strange to us.”
The Port of Los Angeles announced on Tuesday, a total of 747,335 containers were processed in December. This marked the fifth consecutive month of year-over-year growth of the port. Even with its 2023 year handling of 8,634,497 Twenty-Foot Equivalent Units, it was around 13% less than in 2022.
Tesla has announced that it is launching Cybertruck in South Korea, only the fourth market where the electric pickup truck becomes available and the first outside North America.
While Tesla took reservations worldwide when unveiling the Cybertruck in 2019, the automaker never confirmed plans to launch the vehicle outside North America.
The Cybertruck is currently only available in the US, Canada, and Mexico.
By any metric, it has been a total commercial flop.
Tesla had accumulated over 1 million reservations for the vehicle and planned for a production capacity of 250,000 units per year, with CEO Elon Musk saying that it could be increased to 500,000 units.
After Tesla unveiled the production version for a much higher price than announced initially and a significantly shorter range, demand fell off a cliff, and now Tesla now has issues selling the truck at a rate of 25,000 units per year.
This quarter is expected to be better due to the end of the tax credit in the US pulling demand forward, but it could prove extremely difficult to move the Cybertruck in North America starting in October.
Tesla is now turning to South Korea to try to sell some Cybertrucks.
The American automaker has told South Korea reservation holders to confirm their orders over the next week, as it will start converting reservations into orders – something it hasn’t done since expanding into Canada and Mexico last year.
The announcement was made via X:
South Korea might sound like a strange, relatively small, distant market for the first expansion of the Cybertruck outside North America, but Tesla is extremely popular in South Korea.
In July, it sold a record number of more than 7,000 vehicles in a single month.
Tesla also has an extremely strong shareholder base in the country.
However, in South Korea, the Cybertruck is going to start at 145 million South Korean won, which is approximately $104,000 USD – making the Cybertruck about $24,000 more expensive than in the US.
It should not be easy to sell in significant volumes despite Tesla’s popularity in the market.
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Environment
Hyundai is plowing billions into building more cars in the US, including a new robot-run plant
Hyundai wants to sell more vehicles in the US. The South Korean auto giant is investing an additional $5 billion to ramp up production. With billions more on the table, Hyundai will build a new robotics facility while ramping up production of Hyundai and Kia vehicles in the US. Here’s what’s coming next.
How Hyundai’s $26 billion investment will boost US sales
Have you noticed more Hyundai, Kia, and Genesis vehicles on the road lately? Over the past few years, the South Korean automakers have grown significantly in the US.
In the first half of 2025, Hyundai and Kia sold more vehicles than in any first half since entering the US market nearly 40 years ago.
Hyundai has no plans of slowing down after announcing another $5 billion investment on Tuesday, “significantly expanding the Group’s footprint in the US market.” The new funds will be used for several new projects, including a new state-of-the-art robotics facility and steel plant in Louisiana.
The new funding is in addition to the $21 billion investment Hyundai announced just a few months ago, bringing the company’s total to a whopping $26 billion.
Hyundai will use the investment over the next three years (2025 – 2028) to boost production, including Kia and Genesis vehicles.
It’s also building a new robotics innovation hub to design, manufacture, and deploy vehicles. Hyundai expects the advanced new facility will create about 25,000 jobs in the US over the next four years. It will have an annual production capacity of 30,000 units.
EVs and hybrids are driving growth
The new investment comes after Hyundai and Kia hit a milestone, selling a combined 1.5 million “eco-friendly” vehicles cumulatively in the US this week.
Hyundai’s Tucson Hybrid and the Kia Niro Hybrid are the brand’s top-selling eco-friendly cars. Meanwhile, the all-electric Hyundai IONIQ 5 remains one of the top-selling EVs in the US and is the brand’s fourth most popular eco-friendly vehicle.
With leases starting as low as $159 per month, the 2025 Hyundai IONIQ 5 is one of the most affordable, efficient EVs on the market. Hyundai has upgraded its best-selling EV with more range (now up to 318 miles), a fresh new style, and a built-in NACS port, allowing you to recharge at Tesla Superchargers.
Hyundai’s new three-row IONIQ 9 is listed for lease as low as $299 per month, and that’s for a nearly $60,000 SUV.
Both the IONIQ 5 and IONIQ 9 are built at the massive new Hyundai Motor Group Metaplant America (HMGMA) in Georgia. Kia’s EV6 and EV9 are assembled at a separate plant in Georgia.
Looking to check one out for yourself? We can help you find vehicles in your area. You can use our links below to view Hyundai and Kia models near you.
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In a move that underscores the growing instability in international e-bike trade, premium electric bike maker Riese & Müller has paused all e-bike shipments to the United States, citing unpredictable steel tariffs as the final straw.
The German brand, known for its high-end urban and cargo e-bikes, informed US dealers this week that it is halting exports for the foreseeable future. While the company pointed to the recent reinstatement of a 50% tariff on certain steel components from overseas, including Germany, the broader issue here seems to be the chaotic and ever-shifting tariff landscape surrounding e-bike imports.
“We need to take a few days to carefully evaluate this situation and its implications before proceeding with further steps,” explained the company in an email to its dealers in the US, according to Bicycle Retailer.
This isn’t the first time tariffs have disrupted the flow of electric two-wheelers into the US. The Trump administration’s Section 301 tariffs targeting Chinese goods initially shook up the industry during the administration’s first term, hitting Chinese-made e-bikes and components with 25% duties before being temporarily suspended. Those tariffs whipped back and forth as exclusions came and went, then became a double whammy after the Trump administration’s “reciprocal” tariffs added even more hardships to e-bike importers in the US. And now, as of July 1, additional steel tariffs have expanded the uncertainty.
What’s unusual in Riese & Müller’s case is that most e-bikes – even expensive ones – use relatively little steel compared to aluminum. Frames, forks, wheels, and most structural components are increasingly made from aluminum alloys or carbon fiber. But with the tariff code system as vague and inconsistently enforced as it is, it seems R&M simply doesn’t want to take the risk of unexpected import costs – or the administrative mess that comes with it, including having to account for how much of a bike is produced from steel components and what the value of those components proves to be.
The impact on the US market will likely be minor in volume; Riese & Müller is a premium but somewhat boutique brand with a loyal yet small customer base. Still, this is a canary in the coal mine. If even premium brands are choosing to step away from the US market over tariff unpredictability, what happens when larger, mass-market brands start running into similar issues?
For now, dealers in the US are being told to sell through existing stock and not take additional orders until the company can determine whether it will be able to continue importing e-bikes into the US. But if the trade war tariffs contineu, this may not be the last premium brand to throw in the towel – at least temporarily.
Electrek’s Take
This isn’t just about one German e-bike brand putting things on pause – it’s a red flag for the industry. While Riese & Müller may be small in terms of US volume, their decision shows how unpredictable tariffs, even on seemingly minor components, can create enough uncertainty to shut down an entire market channel. Most e-bikes are made primarily from aluminum, not steel, but when customs enforcement can interpret tariff codes in vague or inconsistent ways, no brand wants to gamble on a five-figure shipment getting hit with a surprise 25-50% fee.
What’s more concerning is that this adds to a growing stack of trade policy hurdles facing e-bike makers: China-focused tariffs, broader “reciprocal” tariffs, battery import duties, and now steel restrictions hitting European brands too. There’s no coherent strategy here, just a patchwork of protectionist measures that hurt importers, confuse dealers, and raise prices for consumers. If the US wants to promote micromobility and clean transportation, it’s going to need smarter policies than this.
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