Fashion is often perceived as disconnected from political matters and events. However, aside from collections drawing inspiration from political situations, there are instances where political events can significantly impact the industry. The current situation in the Red Sea serves as an example.
In November, a month after the Israel-Gaza war stated, the Iranian-backed Houthi militia in Yemen, supporting Hamas, began targeting cargo ships in the Red Sea, particularly those perceived to be linked to Israel or its allies.
Situated south of the Suez Canal, the Red Sea is a crucial shipping channel connecting Europe to Asia and East Africa and serves as the most efficient trade route for ships moving from Asia to Europe.
So far, the US and UK conducted a series of air raids on Houthi sites in Yemen intercepting most attacks on cargo ships. Consequently, the Houthis have declared American and British interests as legitimate targets as well. In the meantime, it was recently announced that Italy will supply the Force Commander for the European Union Aspides Operation in Red Sea, designed to protect commercial ships and intercept attacks, but will not take part in strikes against the Houthis.
The impact of this situation has become evident already with certain products. By the end of January, it was observed that India's basmati, the long-grain aromatic rice, became more expensive due to disruptions caused by this geopolitical situation.
Around the same time, the Italian association of artisans and small businesses, Confartigianato, reported significant economic losses for Italy between November 2023 and January 2024 due to the Red Sea crisis, totaling 8.8 billion euros or 95 million euros per day. This included 35 million euros in lost exports and 60 million euros in lost supplies. The impact particularly affected Italy's micro and small businesses, which contribute 32.7% of the EU's total manufacturing exports to non-EU countries.
The Bank of Italy, in its economic bulletin for January, also disclosed that nearly 16% of Italy's import value relies on naval transportation in the Red Sea. A substantial portion of Italy's purchases from China (the country's second-largest supplier after Germany) along with imports from other economies in East Asia and Gulf countries exporting energy raw materials, passes through this route. Additionally, one-third of Italian imports in the fashion sector are routed through the Red Sea.
The impact of the crisis extends across various sectors and products (food, metal, jewelry and eyewear, machinery and equipment), but the fashion industry is experiencing particular strain and the crisis has the potential to disrupt "Made in Italy" products and the fashion supply chain.
Cargo ships carry fibers, fabrics, and components, such as zippers, from Japan, India, and China, as well as semi-finished or finished garments from Southeast Asia. Preliminary estimates from the National Chamber of Italian Fashion in 2023 indicate that imports of Italian-made fashion, including jewelry and eyewear, exceeded 50 billion euros. China played a significant role as the main supplier, contributing 4.4 billion euros in imported goods, particularly in the clothing, accessories, and footwear segment.
At the moment many companies are facing material delays, reaching up to 15 days, but further delays are expected. These delays come with increased shipping costs to find alternative routes to the Red Sea: major transportation companies redirected naval traffic to a longer route circumnavigating the African continent, incurring in additional fuel and insurance expenses. Some companies, like FGF Industry, based in the Veneto region, in Italy, and producing brands like Blauer USA and Ten C, have opted for this longer route to avoid the Houthi attacks, extending journeys by about 15 days.
Additional options for transportation involve air transport (which is about six times more expensive than shipping trough the Red Sea), or intermodal transport by train from Shanghai to Hamburg (costing about three times more).
Transport disruptions imply delays in the production and in-store deliveries of finished goods, challenges that will potentially result in increased costs for consumers. The crisis introduces therefore disruptions to the supply chain, but also contributes to export slowdowns. Prices for container transport from Italy to China have also tripled.
Reshoring and relocating are potential options to sort out the import delays, but they also present challenges considering the number of factories that operated in Italy and that closed down over time while the country became heavily dependent on materials or parts from China. The Covid-19 pandemic and shortages of masks and semiconductors underscored the importance of relocating some production to Europe, with Eastern European countries still representing the cheapest option for Italian companies (yet the ongoing war in Ukraine should also be considered when relocating production to Eastern Europe). Companies may find it easier to produce in Italy if they would be able to negotiate tax relief packages with the government, but the crisis should be addressed urgently taking into considerations a wide range of products, from components and metal parts for the automotive industry to the agri-food sector (among the other imports that reach Italy crossing the Red Sea there are rice, vegetable oils, processed tomatoes, tea and coffee, fish products, nuts and animal feed).
Yet, the situation in the Red Sea could have repercussions on multiple levels and on various industries. The Houthis announced through their spokesperson that they may employ new tactics to counter the American-British air strikes. Today, it was announced that the Red Sea crisis may impact the technological domain as well: telecom firms associated with the UN-recognized Yemen government announced indeed that Houthi rebels are planning to sabotage a network of submarine cables in the Red Sea critical to the functioning of the Western internet and the transmission of financial data.
Approximately 17% of the world's internet traffic is estimated to pass through the Red Sea via fiber pipes (some of these cables are also vulnerable to damage from ships' anchors and earthquakes), and, while security analysts warn that the Houthis may lack the submersibles needed to reach the cables, some points run at a depth of 100 meters, potentially reducing the need for advanced submarines.
The significance of geopolitical situations should therefore never be underestimated due to their potential to cause widespread disruptions across various industries. We do live in an interconnected world, so turning a blind eye or overlooking these dynamics is not only unwise but can also have far-reaching consequences for global economies, trade, and the functioning of critical sectors. So, sure, enjoy the upcoming fashion weeks, but remain vigilant and keep your eyes always open on the global events.
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