EU firms unfazed by Red Sea crisis

European companies operating here in the country and Southeast Asia do not mind the tension in the Red Sea as it will not disrupt their operations since they do not rely fully on imports.

“The Red Sea crisis does not necessarily have a big impact because most of the European companies that are established in Southeast Asia also have local production in the region. So this will not be a critical factor, but it’s something that we need to observe to see how it’s going to be deadlocked,” Paulo Duarte, president of the European Chamber of Commerce of the Philippines, told reporters on the sidelines of the Doing Business in the Philippines 2024 press launch in Makati City on Wednesday.

Earlier, Philippine Economic Zone Authority Director General Tereso Panga warned of a crisis as a fifth of their registered locators said what was happening in the Red Sea had a “significant” impact on their operations.

Due to the tension, Panga said that roughly one-third of global container ships now take the Suez Canal route, and re-directing ships around the southern tip of Africa is expected to cost up to $1 million more in fuel for every round trip between Asia and Northern Europe.

According to some shipping lines, Panga said this would raise shipping costs by 15 percent.

84 companies in ecozones affected

Panga on Thursday said there were 448 registered business enterprises engaged in exports to Europe and 523 RBEs engaged in imports from Europe at the PEZA zone.

“Hence, we proactively conducted a rapid survey across all 4,378 of our locators that could potentially be affected by the Red Sea crisis, considering both import and export activities involving Europe, or lack thereof. Additionally, feedback and comments were sought from shipping lines and freight forwarders,” Panga told reporters in an email.

He said out of all the PEZA RBEs surveyed, only 347 responded.

“Among them, 24 percent (84 RBEs) confirmed significant effects on their operations due to the Red Sea crisis. Meanwhile, 73 percent (252 respondents) stated that they were not affected by the crisis, and 3 percent (11 respondents) did not respond to the survey,” he said.

The effects on RBEs include delays in import shipments (7-20 days) and the rearrangement of vessels for materials coming from Europe, leading to longer lead times and potential reductions in production capacity.

“Negative effects also encompass limited vessels, shortages of containers (especially during the Lunar New Year season), port congestion on the US West Coast, and late confirmation of bookings. Concerning export shipments, 25 percent of RBEs reported delays of seven days to one month due to vessels being re-routed via the Cape of Good Hope. Challenges include shortages of containers, late confirmation of bookings, limited vessels, and port congestion in various locations,” Panga said.

On the other hand, freight costs to Europe and the Middle East have surged 100 to 400 percent, with RBEs resorting to using air freight, which is significantly more expensive than sea shipment.

“As for the goods being imported and exported by our RBEs, the majority consists of electronics, semiconductors, automotive parts, printers, flexible printed circuits, coil transformers, aircraft galley parts, enterprise solid-state drives, optically coupled isolators, raw materials of insulation anvil, quick crimp, wire anvil, and radiation survey meters, among others,” Panga said.