Red Sea tensions threaten global competitiveness of Jordanian industry


Published: 2024-01-06 15:28

Last Updated: 2024-04-23 19:43

Red Sea tensions threaten global competitiveness of Jordanian industry
Red Sea tensions threaten global competitiveness of Jordanian industry

The Israeli Occupation continues its brutal aggression on the Gaza Strip for the 92nd consecutive day, leading to an expansion of the conflict in the region, with Houthi forces carrying out military attacks against vessels associated with the Occupation in the Red Sea.

As a result of the military operations conducted by the Houthi group in the sea, shipping companies have increased the insurance costs for their vessels passing through the Bab el-Mandeb Strait to unprecedented levels. This could threaten the competitiveness of Jordanian industries due to the rising costs of raw materials.

- Fifty percent of imports pass through Red Sea -

Tameem Al-Qasrawi, the Vice President of the Amman Chamber of Industry commented on the rise in maritime shipping prices in the Red Sea, explaining that approximately 50 percent of the Kingdom's imports pass through the Red Sea.

Al-Qasrawi told Roya that the main countries from which Jordan imports, and whose goods pass through the Red Sea, are China, Japan, India, Malaysia, New Zealand, and Australia.

- High costs for alternative routes -

Al-Qasrawi explained that alternative routes for imports through the Red Sea include the route of Cape of Good Hope or using the ports of Oman and the UAE on the Arabian Sea and the Gulf coast.

He pointed out that relying on the Cape of Good Hope route would result in an increase in the shipping time to a whole month, in addition to an increase in shipping costs.

"Not all shipping lines reach the port of Aqaba, and due to the high demand relative to the supply, the cost of imports has increased," he added.

There are alternative ports such as Salalah Port in Oman and the Port of Jebel Ali in the United Arab Emirates that can be used by unloading shipments there and then transporting them by land to Jordan.

Al-Qasrawi highlighted that while this option is available, it comes with significant drawbacks. He emphasized that relying on the alternative route would result in extended shipping times of up to a month. Additionally, he pointed out that the cost of transporting a 40-foot container through land shipping would range between JD 1800 to JD 2400, making it a considerably expensive and time-consuming alternative.

- Yemeni company for cargo transport -

In order to minimize the losses that the local industry sector will incur, it is necessary to resort to alternative plans that ensure the continuous arrival of raw materials for local industries and the sustainability of the export process for these products to global markets.

Al-Qasrawi said that a Yemeni company with three ships has presented an offer to transport goods to Jordan.

"The Yemeni company offered to transport goods from the Jebel Ali port in the UAE to the Aqaba port, where these ships can carry up to 1300 containers," he added.

He pointed out that this option would reduce the losses if implemented, but it would not completely stop them since Jordan's need for goods is much greater. He confirmed that costs would undoubtedly rise for the local industry.

- Threat to Jordanian exports -

The repercussions extend beyond impacting Jordan's imports, as both damages and rising costs pose a threat to the country's exports due to geopolitical changes in the Red Sea.

Al-Qasrawi told Roya that approximately 28 percent of Jordan's exports pass through the Red Sea, indicating that rising raw material prices or shipping costs will take Jordanian industries out of global competition.

He stressed that the challenge in the Red Sea is a regional concern, in contrast to the global consequences of the coronavirus. He clarified that a manufacturing plant in a European nation, as an example, will not experience the same degree of impact from the rise in shipping expenses as a plant in Jordan.

- Government efforts to minimize losses -

Due to the current repercussions, the government, represented by the Minister of Industry, Trade and Investment and the Minister of Transport, met with representatives from the Chamber of Industry. Several solutions were proposed to minimize losses through the Arab Bridge Maritime Company.

In a recent development, Al-Qasrawi revealed to Roya that the government is exploring a temporary measure to alleviate the impact of rising costs. The proposal involves temporarily lifting the exclusive unloading of containers at the port of Aqaba. Instead, there is a suggestion to unload goods at the Dammam Port in Saudi Arabia, followed by overland transportation to Jordan.

Al-Qasrawi stressed that the direct repercussions of cost increases have been felt for several weeks. He underlined the significance of this move in addressing the immediate challenges, emphasizing the potential risks associated with future disruptions in the supply of raw materials. The government is actively seeking solutions to minimize losses and maintain the stability of local industries.