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Around 12% of the annual global trade worth $1 Trillion passes through the Red Sea. Recently, the southern Red Sea and the Bab al-Mandeb Strait, have become focal points of global concern due to the escalating vessel attacks by Yemen’s Houthi movement. For the global shipping and logistics sector, this represents a critical challenge, manifesting in operational delays, fluctuating prices, sustainability concerns of longer detours, and the necessity for immediate adjustments in operations planning.
Learn which carriers are pausing the Red Sea route currently. Explore the details on our latest blog.
Developments So Far Following the Attack
(Events are listed in reverse chronological order, with the latest news at the top, until Dec 20th)
• Shipping rates have increased, albeit remaining well below pandemic peaks.
• MSC, CMA CGM, and Hapag-Lloyd announce surcharges to cover added expenses from rerouting ships via the Cape of Good Hope.
• CMA CGM notifies shippers about Clause 10 of the Bill of Lading, granting the right to charge extra for alternate routings.
• Container ship journeys are expected to be at least ten days longer due to the Cape of Good Hope route, adding about 3,500 nautical miles.
• Shipping companies redirect approximately $80 billion worth of cargo from the Red Sea.
• Over 100 container ships opt for a longer 10/14-day route around Africa, avoiding the Red Sea.
• Consumer goods are expected to be most impacted.
• Maersk, Hapag-Lloyd, CMA CGM, MSC, HMM reroute vessels. Israeli-based ZIM follows suit, avoiding the Arabian and Red Seas. Wan Hai joins the list.
• Major carriers announce the diversion of ships via the Cape of Good Hope, considering the time required for the announced military coalition to be fully operational.
• OOCL and Evergreen halt cargo acceptance to/from Israel pending further clarity.
• Container ships are anchored, and tracking systems are turned off as traders adjust routes and prices in response to attacks.
• BP and other oil and gas giants suspend tanker movements in the affected maritime corridor.
Navigational Shifts: Major Carriers Rerouted via South Africa
As of Dec 21st, some of the largest shipping companies, including Maersk, Hapag-Lloyd, CMA CGM, and MSC, have proactively rerouted their vessels to circumvent the Red Sea's emergencies. OOCL and Evergreen have taken a decisive step by halting cargo acceptance to and from Israel until further clarity emerges. The repercussions of this situation extend beyond container shipping; major oil and gas players, such as BP, are also suspending tanker movements through this critical maritime corridor.
Emerging Discussions: Naval Escorts for Commercial Vessels
In a significant development, UK and French naval forces have actively engaged in the region to enhance maritime security. These warships have been deployed in response to the escalating threats, showcasing their capabilities through the use of advanced anti-drone missiles to intercept potential threats. This intervention by UK and French naval assets underscores the seriousness of the situation and the international community's commitment to ensuring the safety and security of commercial shipping lanes.
Also, several media outlets are circulating discussions about potential naval escorts for commercial vessels traversing the strait. However, as of now, these discussions remain unconfirmed.
Analyzing the Ripple Effects on Global Trade and Identifying Affected Vessels
Amidst this dynamic situation, we have conducted a detailed analysis of vessel movements in the last 3 months. We focused on container cargo vessels that favoured the Suez Canal and the Red Sea over the Cape of Good Hope within the last three months. Some of these vessels have recently opted for the longer route via the Cape of Good Hope, with some having already passed by the Cape, while others are currently en route towards this alternative pathway. Based on the analysis we found that vessels are indeed changing their route in response to this security threat.
Our initial analysis indicates that potentially more than 50 vessels have already chosen to take a lengthier route via the Cape of Good Hope instead of their usual path through the Red Sea and Suez Canal. We anticipate an increase of approximately one week in transit times for Asia to Europe routes diverted via Cape of Good Hope, traditionally reliant on the Suez Canal, and around 10 days for routes from South Asia to the US East Coast. Considering the collective impact on all vessels, the recent events can significantly affect the global supply chain in terms of delays, costs, and emissions.
As we assess the environmental repercussions of these rerouting decisions, our analysis reveals a substantial increase in emissions due to the longer transit times necessitated by the detours. Specifically, when rerouting vessels from the South Asia Region to Europe, we observe an approximate 50% increase in CO2 emissions. Similarly, for routes from the South Asia Region to the US East Coast, there is an estimated 20% rise in emissions.
Business Implications for Shippers
The increase in distance travelled will mean longer transit time which will impact sailing schedules and service reliability, leading to delays.
For Example: A voyage from Singapore to Rotterdam would span 11,755 nautical miles if rerouted via the Cape of Good Hope, compared to its usual route through the Suez Canal, covering 8,288 nautical miles. The increase in distance will lead to:
1. Increased Transit Times
- South Asia to the US: Choosing the Cape of Good Hope over Suez adds about 7 days.
- Asia to Europe: Opting for the same route adds approximately 10 days.
[Note: Calculations based on South Asia (India/Colombo region) to Europe and the US East Coast.]
2. Increased Costs
The added crewing, fuel and insurance costs are all likely to be passed on to consumers, as per the BBC report. Based on industry reports, the re-routing will cost up to $1 million extra in fuel for every round trip between the Far East and North Europe.
3. Increased Co2 Emissions
- South Asia Region to Europe: Approximately 50% increase in CO2 emissions.
- South Asia Region to US East Coast: Around 20% increase in CO2 emissions.
[Note: Various factors influence CO2 emissions, but we observe this general trend.]
What Can Be Helpful for Shippers Now?
- Knowing which vessels are being rerouted and the changes in average transit times.
- The latest status of port congestion may help them to deal with the situation better.
- With the most reliable ETAs for ocean freight, shippers may avoid detention and demurrage charges when their shipments arrive at the POD.
Potential Impact on International Trade and a List of Affected Container Vessels
Stay ahead with our regularly updated dynamic list, offering insights into affected vessels. We'll continue daily updates to keep the logistics community informed about container vessels undergoing significant route modifications in the Red Sea, rerouting towards South Africa.
Get in Touch to Mitigate the Impact on Your Operations
Should you require clarity on whether your cargo is impacted and potentially delayed, we invite you to schedule a consultation with our expert team.
Follow our Red Sea Crisis Bulletin to get all latest updates.
