Thailand’s THB1.31-trillion exports threatened by Red Sea conflicts

Assoc Prof Aat Pisanwanich, a scholar on international economics, warned that the country’s export shipments via this route could be severely affected as many shipping firms were forced to use a longer route south of the African continent, leading to higher costs.

He noted that about 15% of world shipping traffic transits via the Suez Canal, the shortest shipping route between Europe and Asia. He estimated that about US$3 trillion of the total global trade of $25 trillion relies on this shipping route.

According to the academic, Thailand’s exports to 15 Middle Eastern countries totalled US$10.99 billion last year, accounting for 4% of all Thai exports. Thai exports to 27 European Union nations (excluding the United Kingdom) were worth $26.81 billion, representing 9.3% of all exports from the kingdom.

“In total, Thai exports to the two major markets were worth about 1.31 trillion baht,” Aat said.

Thai exports to Europe and the Middle East include farm products, processed agricultural goods, car parts, electrical appliances, and rubber.

The academic warned that if the ongoing war between Israel and the Hamas militant group in the Gaza Strip expands to include other militant groups in the region, namely the Houthi rebels in Yemen and the Hezbollah militants in Lebanon, the global economy and trade could see a new crisis.

“Shipping cost will increase due to the higher costs of fuel and insurance resulting from the armed conflicts. If ships can no longer pass through this route and have to do a detour south of Africa, the transportation costs could rise by at least 15% and the supply chain would be disrupted,” Aat said.

“Thai exporters should closely follow the developments and plan ahead to cope with it,” he added.

In recent days, pro-Hamas Houthi rebels in Yemen have stepped up attacks on ships on the Suez Canal, targeting Israel-bound vessels using the Bab el-Mandeb Strait, which connects the Red Sea to the Gulf of Aden.

The Houthis have launched a series of missile and drone attacks on ships in the area, which it says are a response to Israel's assault on the Gaza Strip.

Meanwhile, the United States has announced the creation of an enhanced naval protection force operating in the southern Red Sea in an attempt to ward off mounting attacks from the Houthis on merchant shipping.

The chairman of the Thai National Shippers' Council, Chaichan Chareonsuk, said that 100-120 shipping vessels pass the Bab el-Mandeb Strait per day, transporting goods between Europe and Asia.

“Radar images show a decrease in the number of ships passing through the Bab el-Mandeb Strait due to the risk of being attacked. Many large shipping lines have stopped using this route,” he said.

Chaichan also said that the question was whether the worsening tensions in the area would lead to a closure of the Suez Canal. If that happens, global trade and economy would see more bad news, he warned.

“I hope things will not get worse than this,” Chaichan said.
He said that if shipping vessels shifted their route to the south of the African continent, it would take 10-15 days longer to transport goods between Asia and Europe. And the freight charge would increase by about $1,500 per shipping container, he added.