New price increase? The cycling sector expects new delays due to the conflict in the Red Sea

The cycling industry is holding its breath in anticipation of the consequences that could result from the conflict unleashed in the Red Sea. The area plays a key role in global trade and several major shipping companies have already decided to circumnavigate the African continent. With this decision, journeys are lengthened and deliveries are delayed, although in principle it should not affect costs.

Uncertainty hits the cycling sector again due to delays and a potential price increase

The escalation of tension in the Red Sea has put global logistics in check. The Bab al Mandeb Strait -flanked by Eritrea, Djibouti and Yemen- is only 32 kilometers wide and is the southern gateway to the Red Sea. The Houthi attacks -a rebel group from Yemen active since 2004- have caused some ships to renounce passing through the Suez Canal and prefer to circumnavigate Africa.

The route through the Red Sea facilitates transport between Asia and Europe; in addition, this shipping route records about 15% of international maritime trade, according to the International Maritime Organization.

At the beginning of the year, the Secretary General of the IMO, Arsenio Domínguez, explained that about eighteen shipping companies "have already decided to divert their ships around South Africa, which adds 10 days to the trip, and negatively affects trade as well as increases transport rates". 

Some bike brands have production centers in Eastern Asian countries; this is the case for some top-level manufacturers like Specialized, Trek, Merida, Scott, Giant or Cannondale -which produce, at least in part, in Taiwan-. These firms therefore depend on the route through the Red Sea to send their bikes to Europe.

Giant has spoken on the matter in Cycling Weekly and considers that in their case "there is nothing to add to the cost of a bicycle for the consumer or the distributor". Although they acknowledge that delays exist, they warn that the situation will worsen in the coming weeks because "we are basically queuing for containers." 

Specifically, Giant estimates that the situation has resulted in an increase of about $500 for each transport container, which can hold 250 bikes; that is, the cost has increased by about $2.50 per bike shipped. They explain that this "is nothing, we are absorbing it" and that "this will not affect the consumer".

Another affected brand is Merida. Although they consider that the shipping price represents an extra $25 per bike, they state that "it is unlikely that any additional cost will be passed on".

On the other hand, they showed optimism about the delays and explained that in some European markets they have a large stock that will mean customers will not notice changes in waiting times.

Another sector where the situation in the Red Sea could have an impact is in spare parts. Shimano could face a rise in costs, which remains to be seen whether it will be passed on to the consumer or absorbed by the Japanese giant. 

Given the impossibility of sending bikes by air -a transport that is much more expensive for the sector than maritime-, uncertainty now looms over the cycling industry. Giant reports that the main problem is that there are not enough containers: as they take longer to reach their destination, they also take longer to return to their origin.

Shipping prices per container increased during the pandemic and, although they have dropped in recent times, they are still above the costs prior to the appearance of the virus.

Delays are already a reality and time will tell if customers will also suffer or if the market will be able to camouflage it, although there seems to be calm regarding prices. As is usually the case in these situations, it is unknown when normality will return to the area that allows this important commercial artery to be restored.