Yemen Monitor/Newsroom
Kenya and East Africa are now experiencing a sharp increase in the prices of essential goods as attacks on ships in the Red Sea escalate, with major shipping lines avoiding the route after two ships were sunk.
According to (the star) website Shipping lines serving Mombasa and Dar es Salaam ports are now saying that shipping costs to the region have increased by up to 20%, with ships being rerouted to the Cape of Good Hope (South Africa) before heading east.
They are also avoiding the Suez Canal, a major route for voyages to Mombasa and the East African coast, following the ongoing attacks by the Houthis targeting ships traveling to Israel and other areas.
According to the East African Shippers Council (SCEA), the rerouting of ships comes with an increase in transit time, which means a higher shipping charges by shipping lines, insurance, which has also affected Kenyan exports.
For example, the transit time to Europe has increased from an average of 24 days to 40 days that led to delays in payments as payments are made upon delivery of goods.
This trend has also put the quality of the product at risk. For example, avocados start to ripen between days 30 to 35.
This means that a 40-day journey plus additional days for clearance at the destination port will see the products arrive at the shelf when they are ripe or spoiled.
“This means Kenya is losing out if compared to countries that can deliver in shorter periods,” said SCEA’s deputy CEO, Ayub Ogambi.
A bunker levy of an additional $450 (Ksh825.57) has also been imposed, pushing up shipping costs for containers.
For example, the cost of shipping a 40-feet (refrigerated) reference container is now Ksh1.3 million, up from $10,000 (Ksh1.28 million).
“The impact is huge. Unfortunately, there is no solution in sight,” Ogambi said.
This is pushing up container costs amid congestion at major ports, especially China, which is Kenya’s biggest import source.
The severe congestion at major Asian ports such as Singapore is leading to a shortage of empty containers in some areas and a buildup in others, ultimately pushing up container prices in China, according to the Container xChange Container Price Index, a technology company that provides a global platform for container trading and leasing.
“The delays are also causing ships to bunch up, leading to increased congestion and schedule disruption,” said Christian Roeloffs, co-founder and CEO of Container xChange.
Ports in China recently recorded the highest container lease rates, reaching $1,750 (Ksh224,875) in December while in Europe, the average cost was $1,340 (Ksh172,190).
According to Maersk, the world’s second-largest container shipping company after Mediterranean Shipping Company (MSC), the situation in the Red Sea has become more complex in recent months.
“The danger zone has expanded and attacks are reaching further offshore. This has forced our ships to lengthen their journeys further, resulting in additional time and costs to get goods to their destination at this time.
The indirect effects of the situation have included bottlenecks and ship bunching, as well as delays and a shortage of equipment and capacity.
“We estimate an industry-wide capacity loss of 15-20% on the Far East to North Europe and Mediterranean market in the second quarter,” the company said.
In 2023, Kenya’s total merchandise trade stood at Ksh3.6 trillion, representing a growth of 7.6% over the previous year, according to the 2024 Economic Survey by the Kenya National Bureau of Statistics (KNBS), with China and the United Arab Emirates being the top import sources.
“The growth was partly driven by higher international prices for key import goods, especially petroleum products, coupled with the depreciation of the Kenyan shilling against the currencies of major trading partners,” KNBS said.
During the review period, export earnings rose by 15.4% to Ksh1 trillion. The net effect was to narrow the trade balance from a deficit of Ksh1.617 trillion to Ksh1.604 trillion.
As Kenya is an importer, the rise in shipping costs translates into higher prices for essential goods as importers and manufacturers pass on the additional costs of finished goods and raw materials to consumers.
The World Bank has since warned that the stability of global commodity prices could hurt the chances of a decline in inflation.
prices stabilized after a sharp decline that played a crucial role in narrowing overall inflation last year, this year, which could make it difficult for central banks to cut interest rates quickly, according to the World Bank’s latest Commodity Markets Outlook report.
This adds to the conflict in the Middle East that could halt the decline in inflation as international trade continues to disrupt, with shipping costs rising in the shipping industry.
This means that Kenya, which is heavily reliant on imports, remains vulnerable as its import bill continues to rise.
China, the United Arab Emirates, India and Saudi Arabia accounted for half of Kenya’s imports last year.
The World Bank’s projections mean that Kenya could see inflation start to rise after consecutive declines this year.
Official data showed that Kenya’s inflation rate fell to its lowest level in two years in April at 5%, driven mainly by improved supplies of key food items, especially grains and edible oils, and falling prices for food and other utilities such as electricity, water and fuel.
However, it rose to 5.1% in May.
According to the Central Bank of Kenya, one of the main risks to inflation is global oil prices, which have been trending upwards since January 2024, largely driven by shipping disruptions across the Red Sea and production cuts by OPEC+ and other allied oil producers.
