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UAE and Saudi Businesses Adapt to Red Sea Tensions by Sourcing Outside Europe

DALL·E 2024 01 15 20.37.40 A dynamic image showing cargo trucks and ships symbolizing the shift towards multi modal transportation solutions in light of the Red Sea issue. The

Exploring New Supply Routes Amidst Rising Costs

Dubai: As tensions escalate in the Red Sea, businesses in the United Arab Emirates (UAE) and Saudi Arabia are rapidly adapting by looking for suppliers beyond Europe. This shift is primarily to counter the rising shipment costs and extended delivery times associated with European routes, especially as the Ramadan and Eid seasons approach, where timely stock availability is crucial.

Increased Shipping Costs and Alternatives

Recent incidents in the Red Sea, including strike actions by the US and the UK against Houthi targets, have led to a significant increase in shipping costs. The cost of shipping a 20-foot container (TEU) from Europe to UAE ports has surged by over $1,000. This has had a ripple effect, with costs rising across various sectors, including sharp increases in shipments from Dubai to Jeddah.

To mitigate these challenges, UAE businesses are exploring deals with suppliers in alternate markets, such as Turkey, to meet short-term needs. They are also considering different freight transportation modes – rail, trucks, or air – to ensure timely delivery of goods.

Multi-Modal Transport Solutions

Given the current situation, shipping companies and importers are turning to multi-modal transport solutions to keep costs in check. This approach combines sea and other transportation modes to expedite shipments. For instance, a multi-modal service from Turkey to Dubai, taking up 21 days, offers a faster alternative than the additional 15-18 days required for ships navigating via the Cape of Good Hope.

Impact on Trade with Saudi Arabia

The Red Sea crisis has notably impacted trade between the UAE and Saudi Arabia. Sea freight costs have escalated, prompting businesses to utilize overland freight options for transportation to Saudi Arabia. This has led to a significant increase in shipments arriving in Dubai and being transported to Saudi Arabia by road.

Sticking with European Suppliers

Despite these challenges, some UAE businesses continue to prioritize their long-standing relationships with European suppliers. They acknowledge the increased procurement costs but choose to absorb them, emphasizing the quality and reliability of European products.

Conclusion

As the Red Sea issue continues to affect global trade routes, UAE and Saudi businesses demonstrate agility and resourcefulness in seeking new supply channels and transport methods. Their proactive approach in exploring alternatives reflects a robust and adaptive business environment, ready to face global market challenges

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