Amid the intensifying conflict in the Red Sea, Australia's agriculture sector grapples with the new, adverse trading conditions. The turmoil has heightened the risk of traversing the Red Sea, especially the Suez Canal, a crucial maritime link between Asia-Pacific, Europe, and the Middle East. This follows the recent strikes by the US and UK in Houthi-dominated regions of Yemen on January 22 in retaliation to the militants' Red Sea attacks.

Opting for safer, albeit longer, routes around South Africa and through the Atlantic Ocean, many shipping companies have chosen to bypass the Suez Canal and potential conflict zones. According to ING Bank Commodities Strategists, diverting shipments around the Cape of Good Hope extends the trip duration by approximately 10 days, contingent on the vessel type and speed.

Despite the canal issues potentially bolstering the competitiveness of some Australian shipments into Asia-Pacific, Middle East, and East African markets, Australia will face higher freight costs for imported goods. However, it is unlikely that container freight will reach the 2021 peak prices.

Source: argusmedia.com