Retailers Ask Consumers To Be Patient Amid Crisis

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U.S.-based retailers are fretting over the upcoming back-to-school and holiday shopping season, but they now have a new reason to be worried – the seemingly neverending attacks by Iran-backed Yemeni militants in the Red Sea.

With for-profit companies already reeling from pandemic woes and supply chain disruptions, the economic barometer is flashing blood red as Houthi rebels have been targeting commercial ships in hopes of pressuring Israel to cease the conflict in Gaza.

This is the 44th such attack in the region since Nov. 19, with the last one occurring only last Thursday. The Houthis have already created uncertainty in the region, leading to significantly delayed shipping times and skyrocketing prices. One of the industries affected by this? Retail. According to Matt Shay, CEO of the National Retail Federation, the increased costs and delays aren’t what troubles them. It’s the “uncertainty” that the ongoing attacks bring in an already fragile economic environment. And there seems to be no solution in sight.

“It’s a big issue,” admitted Shay in an interview with “Cavuto: Coast to Coast” on Monday. “We’re just thankful that this is the slower low-demand season, but the unforeseen costs and delays will definitely place a damper on back-to-school and holiday shopping.” The uncertainty brought about by the seemingly growing violence is already wreaking havoc by making the already difficult negotiations for renewing shipping contracts more unpredictable than ever.

The turmoil in one of the world’s busiest shipping zones has spurred shipping rates and deliveries to climb and has also led companies to reportedly explore alternative shipping routes through the Suez Canal. But Venezuela’s unrest and Ukraine’s Red Sea turmoil will most likely have retailers hoping for a better alternative. One such country is China.

As one of the largest trading partners of Iran, Shay believes the Chinese would have to be part of the coalition of nations that could influence on defeating the Yemeni rebel violence and make it easier for retailers to get goods to the market through the Red Sea.

However, the Chinese government has remained mum about the possibility of influencing the conflict in the Red Sea. However, recent reports suggest that Yoichi Yamamoto, Japan’s Foreign Ministry’s Middle East correspondent, will reportedly start talks with China’s Ministry of Foreign Affairs on Beijing’s alleged pressure for Iran to quell the ongoing violence.

The move caught many by surprise since China typically avoids persuasion and more pronounced inactions to maintain steady trade and business relations. The pressure brought upon by the Yemeni militants may have pushed companies to look for alternatives to keep their business afloat.

Another problem, the Panama Canal has entered a state of drought this month. This has led giant shipping company Maersk to inform their customers that ships carrying cargo from Oceania (Australia and New Zealand) will not be traveling through the canal, instead being serviced through land bridges. This is only the beginning, as further routes being opened may follow suit.

Maersk also stated that the shipping time from the popular port of Shenzhen, China, would be a whole week longer when opting for the Suez Canal than through the Panama Canal, effectively making the latter the port of choice. However, the drought plaguing the dynamo of shipping trading undoubtedly affects the global supply chain, and shipping and trading costs becoming higher.

The Panama Canal Association claimed that the drought was complex and multi-faceted; while a basic explanation could be that the detail may take time for weather and wind conditions to change.

Quite the predicament indeed. Add the fact that the global economy has an everyday presence there and anything that can throw the balance of goods in their favor will cause some people to raise their eyebrows. Luckily, the government is already working hand in hand with Maersk to mitigate disruptive water transportation, and they claim to be ready for any sort of weather anomaly that may creep up.

Fox Business | CNBC