Red Sea conflict could delay NZ construction projects

Wednesday, 17 January 2024

More shipping firms have stopped transiting via the Suez Canal.

Construction projects could be delayed as builders start factoring-in the possibility that they may experience delays sourcing products from Europe for much of the year, a business body has warned.

Building Industry Federation chief executive Julian Leys said disruption caused to Red Sea shipping due to attacks by the Houthi group in Yemen had not had a significant impact on the availability of building materials in New Zealand so far.

But the situation in the Red Sea had “got a lot worse in the last few days”, he said.

Qatar this week suspended shipments of liquefied natural gas through the Red Sea, and the British government warned of the possibility of further strikes on Yemen.

The Houthis control territory around the entrance to the Red Sea, which is less than 30 kilometres wide at its narrowest point.

The US container ship Gibraltar Eagle was struck by an anti-ship ballistic missile in the Gulf of Aden on Monday, while a missile was fired from Yemen in the direction of a US destroyer on Sunday.

Leys said all suppliers that shipped building products to New Zealand from Europe were now avoiding the Red Sea and the Suez Canal, which meant an extra two to three weeks’ transit time as vessels were re-routed around the Cape of Good Hope.

“Procurement teams within New Zealand importers and manufacturers of building materials are now factoring the longer transit times into their orders from Europe with the situation possibly continuing for several months.

“A prolonged disruption is most likely to impact the availability, timing, and cost of some imported materials and potentially could delay some construction projects.”

Importers were seeing additional freight charges of about US$500 ($806) for a 20-foot shipping container and a US$1000 surcharge for each 40-foot container.

“These costs will get passed on through the supply chain,” he said.

Supermarket group Foodstuffs said on Monday that it had begun re-ordering some grocery supplies earlier to reduce the risk of shipping delays impacting shoppers.

Countdown-owner Woolworths NZ said it had seen a few delivery delays, but expected “no major impacts for customers at this stage”.

Employers and Manufacturers Association chief executive Brett O’Riley said it was unfortunate that the conflict had coincided with a drought that was restricting the flow of ships through the Panama Canal in Central America.

“We saw during Covid how fragile the supply chain can be, and having the Red Sea and Panama both impacted is not encouraging,” he said.

“Fortunately, we're seeing the number of international flights to New Zealand from places like China and the US back almost to 2017 levels, so we've definitely got more air freight capacity than we've had in a long time.”