SINGAPORE – The cost of a wide range of goods – from furniture to fertilisers – could shoot up in Singapore in the wake of increased attacks on shipping by armed groups and pirates, say experts.

They note that while the impact on Singapore has been manageable so far, local businesses and consumers should not be surprised to see the prices of some products rise in the coming months.

Last week, Houthi militias in Yemen responsible for attacking commercial ships in the Red Sea shot missiles at Israeli and American ships in the Indian Ocean for the first time.

This came just hours after they vowed to extend the violence against Israeli-linked ships beyond the Red Sea, Bab Al-Mandab Strait and Gulf of Aden, Arab media reported.

The Houthis have launched attacks against around 40 commercial ships linked to Israel, the United States and Britain in the Red Sea since November 2023. Maritime risk management expert Ambrey Analytics noted that at least 16 vessels have been struck, with recent attacks becoming more aggressive.

A Houthi missile attack earlier in March struck the True Confidence in the Gulf of Aden, killing three crew members and marking the first deaths caused by the armed group on shipping since the violence began. In February, the Rubymar was hit and eventually sank, spilling some of its cargo – around 41,000 tonnes of combustible fertiliser – into the Red Sea.

Mr Mick Aw, senior partner of professional services firm Moore Stephens, noted: “Shipping costs have already risen significantly because of the crisis in the Red Sea.

“If the Houthis successfully target ships in the Indian Ocean, such that commercial vessels are intimidated from traversing the Indian Ocean, that could exacerbate the pressure on shipping costs.”

Other risks are also emerging.

Somali pirates operating along the Somali coast near the Red Sea hijacked a Bangladesh-flagged ship carrying coal to the United Arab Emirates from Mozambique last week, taking its crew of 23 hostage.

The Abdullah is the latest victim of a spike in pirate attacks while international naval forces are occupied defending ships from the Houthis in the Red Sea.

Somali pirates last hijacked a ship, the Bulgarian-owned bulk carrier Ruen, in December 2023. Its 17 crew members were finally rescued by the Indian Navy last week.

Two Somali gang members told Reuters they were taking advantage of the distraction provided by Houthi strikes to get back into piracy after lying dormant for nearly a decade. More than 20 attempted hijackings have taken place since November, according to Reuters.

The missile attacks and pirate raids are adding to the risks and costs shipping companies now face, including higher insurance premiums and crew salaries as their jobs become more dangerous. Shipping lines are also hiring armed security guards to ensure a safe passage for crew and cargo.

In February, International Maritime Organisation secretary-general Arsenio Dominguez warned shipping companies to be on high alert for piracy off the African coast.

The stakes for shipping are rising at a time when shippers are already paying more to avoid the Suez Canal in the Red Sea and rerouting long-haul trans-Pacific and Asia-Europe services via the Cape of Good Hope in South Africa, adding as much as two weeks to a standard sailing.

The Suez Canal – the shortest maritime route between Asia and Europe – carries about 15 per cent of global maritime trade volumes. 

The International Monetary Fund notes that the volume of trade that passed through the Suez Canal dropped by 50 per cent year on year in January and February, while the volume transiting around the Cape of Good Hope surged by an estimated 74 per cent above last year’s level.

More recently, poor productivity and irregular operations at some African ports have also led to shipping delays.

A spokesman for Singapore-based container line Ocean Network Express (ONE) said that issues such as port congestion due to bunching schedules are also beginning to surface.

The spokesman said that some of ONE’s vessels have been asked to call at smaller African ports such as Tangier to connect cargo.

This increases its operational expenses like bunker and vessel costs, “due not only to the additional distance but also measures such as speed increases and additional vessel deployments”.

Mr Turloch Mooney, global head of port intelligence and analytics at S&P Global Market Intelligence, said some vessels must refuel or restock en route as they make the longer sailing around South Africa, and could be impacted further if there are delays due to port congestion.

As a result, “freight rates have been rising for shippers, particularly on Asia-Europe trades, but also in other world regions, albeit to a lesser extent”, Mr Mooney said.

Data from global maritime consultancy Clarksons shows that container freight rates from Shanghai to North Europe and the US East Coast were more than twice as high in March than early December 2023.

Signs of strain are already beginning to emerge across some supply chains.

Automakers Tesla and Volvo Cars have suspended some production in Europe in 2024 due to delays in the delivery of imported components, while Adidas has told retailers that deliveries of its sports shoes and apparel are being delayed by Red Sea shipping disruptions.

Mr Aw reckons it is too early to tell if the Houthi raids in the Indian Ocean will be as effective as they have been in the Red Sea.

“The Indian Ocean represents a much wider operation than the Red Sea attacks, and it remains to be seen how effective such attacks will be. Furthermore, there may be reciprocal naval actions from governments around the world,” he said.

“On the Somalia attacks, we believe that the effects on shipping may be more muted, given that the volume of ships traversing the Red Sea is already reduced.”

The Singapore Government has noted that disruptions in the Red Sea have not had a big impact here so far.

In a written answer to a parliamentary question on Feb 5, Minister for Trade and Industry Gan Kim Yong said there have been delays in imports from Europe that are typically transported via the Red Sea, such as petrochemicals, speciality chemicals and machinery.

He added that while freight rates have risen, local businesses “have provided feedback that these repercussions are manageable thus far, as the proportion of goods that are shipped from Europe by sea is small compared to Singapore’s total global imports”.

Still, Mr Gan noted that gross domestic product growth could fall and inflation rise beyond current forecasts should the conflict escalate further.