Red Sea Attacks Prompt Global Route Shift

The Red Sea, a vital maritime route connecting the Mediterranean Sea to the Indian Ocean through the Suez Canal, has become a red zone for shipping companies due to recent missile attacks on vessels. This critical waterway is a linchpin for global trade, with the Suez Canal alone accounting for 12% of the world's maritime trade.

According to Reuters, Yemen's Houthi rebels, claiming responsibility for recent missile and drone attacks on vessels in the Red Sea, have heightened tensions in the region. This has prompted a senior Houthi official to issue a warning on Tuesday, advising cargo ships in the Red Sea to avoid traveling toward Israel. 

The redirection through Cape of Good Hope is expected to affect the global shipping industry. 

S&P shared that based on a document analysis, a container bound for the Middle East will now consider a war risk surcharge of US$100/TEU on dry and reefer cargo. Freight forwarders are already increasing rates on shipments, adding these war risk surcharges. 

This shift will impact the transportation of goods, leading to increased costs, longer transit times, and potential capacity constraints, especially since, according to the UN Conference on Trade and Development (UNCTAD), over 80% of the volume of international trade in goods is carried by sea. The decision to redirect through the Cape of Good Hope adds approximately 3,500 nautical miles to shipping routes, causing delays of 7 to 14 days, higher freight rates, and capacity issues.

Hapag-Lloyd Takes Precautionary Measures

Nils Haupt, Senior Director of Corporate Communications, Hapag-Lloyd, confirmed the incident involving their vessel Al Jasrah to MBN. The 15,000 TEU container ship was attacked near the coast of Yemen, while sailing in the MD2 service. No crew members were injured. However, in response to the security threat, Hapag-Lloyd decided to pause all container ship traffic through the Red Sea until Monday. The company, which moves about 6.9% of the global containers, will reassess the situation before resuming operations. In the meantime, it has rerouted several ships via the Cape of Good Hope.

Maersk Expresses Concerns

Through a series of tweets, Maersk, which controls 16.90% of global containers, expressed concerns about an incident involving the MAERSK GIBRALTAR traveling from Salalah, Oman, to Jeddah, Saudi Arabia. While the crew and vessel remained safe, the incident adds to the growing unease in the region. The recent attacks on commercial vessels in the Bab al-Mandab Strait are seen as alarming, posing a significant threat to the safety and lives of seafarers.

MSC PALATIUM III Incident Adds to Tensions

Through a press release, MSC, which moves 17% of global containers, announced that on Dec. 15, 2023, the container ship MSC PALATIUM III fell victim to an attack while transiting the Red Sea. Despite the crew's safety and limited fire damage to the vessel, MSC decided to halt Suez Canal transit until the Red Sea passage was deemed safe. Rerouting some services via the Cape of Good Hope will disrupt sailing schedules, impacting both time and cost for vessels.

DSV Takes Action

DSV also communicated that it closely monitors the situation in the southern Red Sea and the Gulf of Aden. The company has also paused or diverted regional operations, affecting cargo transportation. 

Cape of Good Hope Faces Congestions

As shipping companies turn to the Cape of Good Hope as an alternative route, port congestion is starting, resulting in significant delays. According to GoComet, nine days of delays are already registered at the Cape of Good Hope.