Red Sea Shipping Disruptions

Red Sea disruptions on UK construction. 2023 ended with disruptions to trade and supply chains after security issues in the Red Sea. To avoid attacks on vessels in the Gulf of Aden and the Red Sea, shipping companies are avoiding the Suez Canal route, which handles around 12% of global trade and rerouting vessels around the Cape of Good Hope with delays of around 7-14 days.

Almost half of vessels in January have so far been rerouted. At this stage, we haven’t seen major impacts on construction product prices but it is still too early to see the effects. Clearly, if disruptions persist, it will significantly affect some imported products through delayed supply and rises in freight prices (that have already risen in less than a month from $1,467 for a 40ft container from China to Northern Europe on 15 December 2023 to $4,758 on 12 January 2024 according to Freightos).

It is worth noting that the majority (76%) of products used in UK construction are made in the UK and so are largely unaffected, unless components in machinery used to make the products are affected. From the 24% of construction products that are imported, two-thirds are from EU countries so are also largely unaffected.

However, the country that the UK imports the most construction products from is China and imports from Asia will be affected, including products such as electrics, white goods, lighting, kitchen and bathroom products, ironmongery and plywood.

UK construction products prices have been falling recently and in November were 2.3% lower than a year ago so the situation is different to when the Evergiven blocked the Suez canal, which occurred at a time when there were already supply issues. Now, products supply is not an issue. However, construction products prices are still 38.5% higher than in January 2020, pre-pandemic.

Many small house builders and contractors are also suffering from the falls in private housing and rm&i demand whilst UK contractor insolvencies are already at their highest levels since the financial crisis. So, if disruptions persist in the Red Sea, this could lead to supply issues for some products and construction product price rises again, exacerbating problems for house builders and contractors in 2024