Red Sea / Suez Canal Shipping Crisis

Major Shipping Companies Suspend Operations and Reroute Vessels

December 21, 2023

In a significant escalation of tensions, Yemen’s Houthi militia has expanded its threats to target ships sailing to Israel, causing disruptions and raising security concerns in the crucial Red Sea region.

Recent attacks in the Bab–el–Mandeb  Strait have prompted a warning from Dryad Global, a UK-based maritime security consultancy, predicting the escalation of boardings, drone, and missile attacks in the area.

The Red Sea/Suez shipping situation is very tense and complex right now. These attacks have raised security concerns and prompted some shipping companies to pause or reroute their shipments through the Red Sea and the Suez Canal.

The Suez Canal is a vital trade route that connects Asia and Europe, and handles about 12% of global trade, 30% of global container traffic and over US$1 trillion worth of goods per year, as noted by BIMCO (Baltic and International Maritime Council). Any disruption or delay in the canal can have significant impacts on the global supply chain and the cost of goods.

This has created a challenging and uncertain situation for the shipping industry and the global economy, as they face the risks of further attacks, delays, and disruptions in the Red Sea/Suez region.

Shipping Giants React to the Red Sea Crisis

Major shipping carriers have responded with precautionary measures to ensure the safety of their vessels and crews.

The most relevant to Freightplus customers is the decision made by RORO carrier, Wallenius Wilhelmsen, to reroute all its Europe – Oceania.

MSC has decided to reroute some services via the Cape of Good Hope, impacting sailing schedules by several days. Maersk and CMA CGM have instructed vessels in the area to pause their journeys until further notice, while Hapag-Lloyd suspended all sailings through the Red Sea.

Several other shipping companies, including ONE, ZIM, Yang Ming, Evergreen, COSCO, and OOCL, have made similar statements about bypassing or avoiding the Red Sea and Suez Canal, with Evergreen, COSCO, and OOCL also halting cargo shipments to Israel.

Global Shipping Disruptions and Economic Impacts

Rerouting ships around Africa’s Cape of Good Hope will lead to increased time and cost for journeys, causing a spike in oil prices and war-risk insurance premiums. This comes amid ongoing disruptions in the Panama Canal, a vital trade route between Asia and the United States, with multiple Asia-US services, rerouted from the Panama Canal to the Suez and, now, further diverted to the Cape of Good Hope.

According to Chris Rogers, head of supply chain research at S&P Global Market Intelligence, transits via the Cape of Good Hope add at least 10 days and over 15 per cent to shipping costs. Insurance companies are responding by hiking premiums on ships, with rates for shipping goods between Asia and the Mediterranean up 62% since the end of November, according to Freightos. Approximately 100 vessels had been rerouted by December 18, exacerbating the global shipping crisis.

The recent shipping challenges in the Red Sea and Suez Canal have caused significant disruptions to global maritime supply chains. The blockage of the Suez Canal by the container ship Ever Given in March 2021, for instance, delayed thousands of containers loaded with consumer items and tied up empty containers that were needed for exports. The blockage is estimated to have held up $9.6 billion of goods a day. The blockage caused a huge backlog of ships waiting to enter the canal and cost the global economy billions of dollars. The incident also exposed the vulnerability of the canal to accidents and external threats.

As tensions rise in the Red Sea region, the international community watches closely, hoping for a swift resolution to safeguard maritime trade and economic stability.

What does the Red Sea situation mean for shipping heavy machinery to Australia?

The impact of these disruptions on shipping to Australia is dependent on various factors such as the nature of the goods being shipped, the shipping routes, and the shipping companies involved. For the RORO shipping of machinery to Australia, the disruptions will cause further delays in the delivery of equipment to Australia and put additional stress on the already strained RORO capacity.  The extent of these delays will depend on the duration of the disruptions and the ability of shipping companies to find alternative routes and modes of transportation.

Freightplus shipments on the following vessels will be affected:

Multinational Security Initiative to Address Red Sea Threats

In response to the escalating security threat, the United States has spearheaded a multinational security initiative known as Operation Prosperity Guardian. The coalition includes Bahrain, Canada, France, Italy, Netherlands, Norway, Seychelles, Spain, and the UK. The announcement of the initiative coincided with reports of two more ship attacks, further adding to the growing list of vessels targeted, including attacks on major carriers such as Hapag-Lloyd, MSC, and Maersk.

The maritime industry now faces critical decisions as ship operators contemplate the feasibility of resuming passages through the Bab–el–Mandeb, potentially as part of military-protected convoys.

Questions loom over whether the new initiative will lead to an escalation of regional hostilities. The duration required to neutralise Houthi attack capabilities is also a pressing concern.

For more detailed information or advice about specific cargo or destinations, talk to your usual Freightplus contact or send your enquiry to mail@freightplus.com for a quick reply.