Is another supply chain crisis about to hit the bike industry? Container shipping rates surge amid unrest in the Red Sea

The struggling bike industry looks set to face another gruelling headwind as it begins 2024, with the recent spate of attacks by Houthi rebels on commercial vessels in the Red Sea prompting an increasing number of firms to pause shipments through the key international trade route and container prices to soar, potentially leading to further supply chain woes for an industry hit hard in recent years by the disruption caused by Covid lockdowns.

This week – despite warnings of severe “consequences” from 12 countries, including the UK and United States – Houthi rebels from Yemen continued to significantly step up their campaign of targeting commercial vessels in the Bab-el-Mandeb strait between the Arabian peninsula and the Horn of Africa, which the Iran-backed group launched in November in protest against Israel’s actions in Gaza.

The Guardian has reported that the Houthi campaign’s recent escalation, which includes hijacking and drone and missile attacks, has prompted 18 of the world’s biggest shipping companies to pause their operations in the Red Sea and Suez Canal, which normally handles around 12 percent of global trade and is accessed by vessels travelling from Asia.

These companies have instead resorted to rerouting their shipments around the Cape of Good Hope, adding around 3,000 nautical miles – about ten days – to journeys connecting Europe and Asia, according to Dutch bank ING.

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This disruption is driving up the cost of shipments between China and Europe (a key route for the bike industry), with maritime research consultancy Drewry reporting that the price of a 40ft container shipment from Shanghai to Rotterdam has spiked from approximately €1,000 in early December to €3,300 this week.

However, despite the soaring prices brought about by the Houthi attacks, those numbers still pale in comparison to the height of the Covid pandemic, when perennial lockdown measures in the Far East precipitated an almost ever-prevalent imbalance in the shipping container chain, and a 40ft container from China to Rotterdam priced as high as €15,000.

The currently over-stocked nature of the bike market, as Cycling Industry News’ Jonathan Harker noted last month, also means that a lack of supply (depending on how long the attacks last, of course) won’t necessarily send immediate shockwaves around the cycling industry.

Nevertheless, the recent disruption has still caused some serious concern, especially in light of the Covid lockdown-inflicted supply chain issues that decimated the bicycle supply chain in 2020 and 2021 (at a time of greatly enlarged demand), creating massive waiting times for containers and price inflation, and resulting in increased product costs and pressures on importers, retailers, and distributors.

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Speaking to GCN last month, Harker noted that the latest disruption comes at an ominously precarious time for an industry reeling in recent months from the troubles suffered by major online retailers and distributors, and whose global manufacturing model remains reliant on the Far East.

“For a market like cycling, already struggling to cope with significant difficulties where we’ve seen major online retailers and trade distributors go into administration, it’s clear there is not much capacity to handle many more challenges,” he said.

“Delays in new model year products reaching the market is bad enough, but stock stuck on container ships also means cash stuck on container ships. Given the liquidity challenges, that’s very bad news for the market.

“The cycle industry won’t be the only market hoping for a swift resolution to this, but likely will be among the sectors that will be hardest hit by this latest supply chain disruption.”