Shipping disruptions in the Red Sea persist, as Houthi militants continue to launch attacks at merchant vessels near the Bab al-Mandab Straits. This is in response to the ongoing Israeli military offensive in Gaza. The total number of attacks in 2023 reached 22, seven times higher than the previous year, and triple the previous peak in 2017.
Due to the instability, major shipping lines continue to avoid the region. The consecutive attacks despite the U.S.-led military coalition presence are likely to further delay the return of other carriers.
Major shipping lines maintain diversions as attacks continue
As attacks on commercial vessels in the Bab al-Mandab Straits continue, container lines have maintained the longer route around the Cape of Good Hope in southern Africa, increasing transit times and distance by nearly 40%.
Redirecting vessels around the Cape is expected to increase the cost of fuel up to $1 million (€915,000) for every round-trip voyage between Asia and northern Europe. Because of its fuel and time efficiency, the Red Sea/Suez Route is a vital Asia-to-Europe trade corridor, transited by roughly one-third of all global container cargo.
In total, $200 billion in trade has been diverted from the Red Sea since November 2023. The security situation is expected to reduce effective global container shipping capacity, which currently totals a combined 24.6 million TEUs, by 10-15%.
Carriers sent some shipments through the Red Sea following the establishment of the U.S.-led military coalition presence, but it was short-lived. Roughly 1,500 commercial vessels transited the waters between December 18 and 30 without issue. However, following an attack on a Maersk vessel, the carrier announced a 48-hour suspension of operations through the Red Sea. Other major carriers quickly implemented similar protocols.
Ocean freight rates surge as security crisis complicates shipping
As carriers continue to route vessels south, ocean freight rates have surged considerably. Both Asia-to-Europe and Asia-to-North America rates have more than doubled since the start of the crisis. Though the latter route is not typically as dependent on use of the Suez Canal, prolonged drought in the Panama Canal has placed an increased reliance on the Middle East route for U.S. East Coast bound shipments from Asia.
Roughly 30% of cargo arriving to U.S. East Coast ports passes through the Red Sea and Suez Canal. Some of this cargo will continue journeys to U.S. West Coast ports with an increasing utilization of intermodal transport to reach the U.S. East Coast, increasing rates on that route by 63%. Though a surge in demand has not yet been seen in the air freight industry, it is likely to occur should the Red Sea crisis continue forcing diversions and prompting delivery delays.
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