MOMBASA, Kenya – Escalating attacks on ships in the Red Sea have set off a sharp increase in commodity prices across Kenya and East Africa.
With two vessels recently sunk, major shipping lines are now avoiding the perilous route, opting instead for the longer and costlier path around the Cape of Good Hope.
Shipping lines serving the key ports of Mombasa and Dar es Salaam report freight cost hikes of up to 20%.
This rerouting, bypassing the traditionally vital Suez Canal, comes in response to persistent assaults by Iran-backed Houthi rebels in Yemen, who have been targeting vessels bound for Israel and other regional destinations.
According to the Shippers Council of Eastern Africa (SCEA), the rerouting increases transit times significantly, driving up freight charges and insurance costs, and impacting Kenyan exports.
The transit time to Europe, for instance, has ballooned from an average of 24 days to 40 days, delaying payments and compromising product quality.
Avocados, for example, start ripening between the 30th and 35th day, meaning a 40-day voyage results in overripe or spoiled produce upon arrival.
“This delay means Kenya is losing out to countries that can deliver more quickly,” stated Agayo Ogambi, SCEA’s acting chief executive.
The new transport disruption fee of $450 (Sh57,825) has further inflated the cost of shipping a 40-foot refrigerated container to Sh1.3 million, up from $10,000 (Sh1.28 million).
The situation is exacerbated by congestion at key Asian ports like Singapore, leading to shortages of empty containers and further driving up costs.
Ports in China, Kenya’s top import source, have seen container leasing prices soar, reflecting the strained global shipping network.
“The delays are causing vessel bunching and schedule disruptions,” said Christian Roeloffs, co-founder and CEO of Container xChange, a global container trading and leasing platform.
Maersk, the world’s second-largest container carrier, underscores the complexity of the situation.
“The risk zone has expanded, and attacks are reaching further offshore. This has forced our vessels to lengthen their journeys, resulting in additional time and costs,” the company said in a communiqué.
In 2023, Kenya’s merchandise trade reached Sh3.6 trillion, a 7.6pc increase from the previous year, driven by high international prices and currency depreciation.
Export earnings grew by 15.4pc to Sh1 trillion, yet the country remains a net importer, making it vulnerable to rising freight costs.
The World Bank has warned that global commodity prices leveling off could halt the decline in inflation, posing challenges for central banks looking to cut interest rates.
With ongoing disruptions in international trade and rising shipping costs, Kenya’s import-dependent economy faces increased exposure to inflationary pressures.
Kenya’s inflation, which hit a two-year low of 5pc in April, rose slightly to 5.1pc in May.
The Central Bank of Kenya identifies international oil prices and shipping disruptions as key risks, underscoring the broader economic impact of the Red Sea attacks.
