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Tesla halts Berlin production over Red Sea disruption Oil prices rise on US-UK strikes over Red Sea attacks
(about 3 hours later)
Tesla is suspending manufacturing at its only European electric car factory as attacks in the Red Sea disrupt supplies. Oil prices jumped by 4% after the US and UK launched strikes in Yemen over recent attacks by Houthi rebels on ships in the Red Sea.
The firm said longer delivery times had created a gap in its supply chains as shipping companies avoid the route. Brent crude hit $80 per barrel for the first time this year as the Iran-backed rebels vowed to retaliate against military action by Western powers.
US and UK forces have carried out air strikes against Iran-backed rebels over their attacks on vessels in the area. While the price rose, it is below highs reached when Russia invaded Ukraine.
The UK government fears if the disruption to cargo traffic spreads then another energy shock is possible. But the UK government fears that if disruption to cargo traffic spreads, another energy shock is possible.
The electric carmaker is thought to be the first company to reveal a problem with its supply chains after shipping firms came under attack by Houthi rebels. The BBC understands the Treasury has modelled scenarios including crude oil prices rising by more than $10 a barrel and a 25% increase in natural gas.
"The armed conflicts in the Red Sea and the associated shifts in transport routes between Europe and Asia via the Cape of Good Hope are also having an impact on production in Gruenheide," Tesla said in a statement to Reuters. On Friday, Brent Crude - the international benchmark for oil prices for much of the world - hit $80.55 per barrel while US West Texas crude increased by 2.92% to $74.94.
It said its Berlin plant will close on 29 January and reopen on 11 February "with the exception of a few sectors" due to a shortage of components. The UK government is concerned ongoing attacks on shipping in the Red Sea could weigh on the UK economy, where growth remains fragile.
Higher energy prices risk inflaming inflation just as it has begun to slow. Meanwhile, the cost of shipping containers on vessels has jumped, meaning that companies could choose to pass on this expense to consumers.
But Simon French, chief economist of Panmure Gordon, pointed out that energy prices are still considerably lower than they were four months ago.
"At these levels, it is actually quite disinflationary for the UK economy," he said.
He added that when the Bank of England comes to make its next interest rate decision in February, oil prices are still likely to be some 20% lower than they were in the autumn.
Houthi rebels in Yemen have stepped up attacks on commercial vessels since the start of the Israel-Hamas war in October. The US said there had been 27 attacks in the Red Sea since mid-November.Houthi rebels in Yemen have stepped up attacks on commercial vessels since the start of the Israel-Hamas war in October. The US said there had been 27 attacks in the Red Sea since mid-November.
The group, which is backed by Iran, has been using drones and rockets against foreign-owned vessels transporting goods through the strait of Bab al-Mandab - a 20-mile wide channel that splits Eritrea and Djibouti on the African side and Yemen on the Arabian Peninsula. The group has been using drones and rockets against foreign-owned vessels transporting goods through the strait of Bab al-Mandab - a 20-mile wide channel that splits Eritrea and Djibouti on the African side and Yemen on the Arabian Peninsula.
Ships usually take this key trade route from the south to reach Egypt's Suez Canal further north. Ships usually take this key trade route from the south to reach Egypt's Suez Canal further north. Many companies are now sending vessels around the Cape of Good Hope instead, a route that adds at least 10 days of travel.
The Houthi group has declared its support for Hamas and has said it is targeting ships travelling to Israel, although it is not clear if all the ships that have been attacked were actually heading to Israel.
Who are the Houthi rebels attacking Red Sea ships?
US and UK strike Houthi rebel targets in Yemen
Many companies are now sending vessels around the Cape of Good Hope instead, a route that adds at least 10 days of travel.
Currently, about a quarter of the world's shipping containers are being diverted.Currently, about a quarter of the world's shipping containers are being diverted.
According to the White House, about 15% of global seaborne trade passes through the Red Sea. This includes 8% of global grain, 12% of seaborne oil and 8% of the world's liquified natural gas.According to the White House, about 15% of global seaborne trade passes through the Red Sea. This includes 8% of global grain, 12% of seaborne oil and 8% of the world's liquified natural gas.
The boss of shipping giant Maersk told the BBC that "significant disruption" to global trade was already being felt "down to the end consumer". Vincent Clerc, chief executive of Maersk, the shipping giant, told the BBC that "significant disruption" to global trade was already being felt "down to the end consumer".
Prior to the military strikes on Thursday, Maersk chief executive Vincent Clerc had called for a "stronger mobilisation" to repel the attacks, which he said would lead to higher prices for customers. On Friday, Tesla announced that it would suspend most car production at its plant in Berlin because of a shortage of components due to shipping disruption.
Earlier this week, Tesco boss Ken Murphy warned the disruption "could inflate the cost of some items but we just don't know at the minute". Earlier this week, Tesco boss, Ken Murphy, warned that the disruption "could inflate the cost of some items but we just don't know at the minute".
Next, Ikea and Danone have said they are expecting delays in receiving goods too.Next, Ikea and Danone have said they are expecting delays in receiving goods too.
Oil prices also rose on Thursday after Iran seized a tanker off the coast of Oman. The oil tanker was heading for Turkey when armed men ordered it to sail to an Iranian port. Who are the Houthi rebels attacking Red Sea ships?
On Friday, the price of Brent crude - the international benchmark for oil prices - rose by 2% to $78.94 per barrel while US West Texas crude increased by 2.1% to $73.55. US and UK strike Houthi rebel targets in Yemen
The BBC understands the Treasury has modelled scenarios including crude oil prices rising by more than $10 a barrel and a 25% increase in natural gas. The Houthi group has declared its support for Hamas and has said it is targeting ships travelling to Israel, although it is not clear if all the ships that have been attacked were actually heading to Israel.
The government is concerned ongoing attacks on shipping in the Red Sea could further shrink the UK economy if disruption goes on to affect tanker traffic more widely.
Iranian-backed Houthi rebels in Yemen have said the attacks are in sympathy with Palestinian suffering in Gaza and the group's leader Abdel-Malek al-Houthi said on Thursday that they "will not back down".
As a result of the attacks, Maersk and several of the world's other major shipping lines have been avoiding a key route for global trade as they prioritise the safety of their crews.As a result of the attacks, Maersk and several of the world's other major shipping lines have been avoiding a key route for global trade as they prioritise the safety of their crews.
"We have ships that are being shot at. We have colleagues whose lives are at risk when this happens and we can simply not justify sailing through these danger zones the way the situation is right now," Mr Clerc said."We have ships that are being shot at. We have colleagues whose lives are at risk when this happens and we can simply not justify sailing through these danger zones the way the situation is right now," Mr Clerc said.
He said the longer route around Africa was sucking capacity out of the global shipping system in the short term, adding anything from seven days to two weeks to a ship's journey, as well as costing $1m (£783,000) more in fuel alone. He said the longer route around Africa was sucking capacity out of the global shipping system in the short-term, adding anything from seven days to two weeks to a ship's journey, as well as costing $1m (£783,000) more in fuel alone.
Rates for moving cargo by sea reached record highs during the pandemic but, along with shipping companies' profits, have fallen significantly over the last 18 months or so. Rates for moving cargo by sea reached record highs during the pandemic. Since the attacks on vessels started in the region, prices for both container transport and that of goods have again surged.
However, the industry has spare capacity partly because the higher cost of living in much of Europe and the US over the last two years has led to a fall in consumer demand. According to the Drewry World Container Index, pricing for a 40ft container hit $3,072 on 11 January, prior to the US and UK strikes carried out on Houthi targets in Yemen.
In Bahrain on a tour of the Middle East this week, US Secretary of State Antony Blinken said extra costs get "translated into higher prices for people, for everything from fuel to medicine to food".In Bahrain on a tour of the Middle East this week, US Secretary of State Antony Blinken said extra costs get "translated into higher prices for people, for everything from fuel to medicine to food".
"And so it's having a real impact on people around the world in their daily lives.""And so it's having a real impact on people around the world in their daily lives."
Related TopicsRelated Topics
TeslaTesla
Global supply chain managementGlobal supply chain management
EconomyEconomy
Shipping containersShipping containers
Global tradeGlobal trade
HouthisHouthis
Shipping industryShipping industry
TradeTrade