Supply Chain Crisis? Red Sea Still Unrest

The current unrest in the Red Sea is expected to cause delays for ships returning to Asian countries, including Malaysia. This crisis has led to increased freight costs, longer lead times, and a shortage of containers for importers and exporters. At least 4 out of 5 major shipping companies and oil giants have suspended shipping through the Red Sea. As expected, this causes shipping costs to rise and oil prices to increase. Tan Sri Soh Thian Lai, president of the Federation of Malaysian Manufacturers (FMM), urged the government to monitor the situation closely to prevent further impact on businesses and the economy.

The crisis has forced major shipping companies to reroute their vessels, adding one to two weeks to shipping times and increasing costs for exporting goods to North Africa, the Middle East, and Europe. Malaysian exporters should prepare for the possibility of scarce container supplies due to the crisis. Soh recommends that Malaysian shippers improve their business strategies to protect their supply chains and shorten delays. FMM also urges shipping companies to honor pre-booked freight rates without adjustment. Besides, Soh advises shippers to consider waiting until the Chinese New Year holiday to export goods. By then, freight costs are expected to decrease during that period.

The crisis has impacted Malaysia’s export rates and imports, potentially leading to higher prices for consumers. While the supply chains for some goods may be disrupted, Malaysian businesses are adapting by adjusting their shipping methods or routes. Malaysian Institute of Economic Research head of research economist Dr Shankaran Nambiar said the following consequences of the Red Sea crisis is still having mixed outcomes, and only time will reveal the full impact. 

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