New News From Red Sea Leads To More Diversions

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A.P. Moller-Maersk now says it will avoid war-torn waterways for the foreseeable future. This Danish shipping company has diverted ships from the Red Sea and its chokepoint, the Bab-el-Mandeb Strait, and will reroute traffic around southern Africa‘s Cape of Good Hope amid drone attacks from Yemen-based Houthi militants that have escalated since November. The Pentagon says that the Houthi attacks are in protest against Israel’s military operation against Hamas based Palestinian operations in Gaza.

Other shipping companies like MSC (Mediterranean Shipping Company), CMA CGM, Hapag-Lloyd, Evergreen Marine, and Zim have also diverted ships from the Red Sea. Only COSCO ships are still in any part of the conflict- ridden region.

This means that most ships have been diverted through Egypt’s Suez Canal, a gateway for 12 percent of global trade. To accommodate the travel around Africa and through the Cape of Good Hope adds anywhere between 7 and 20 days more to reach the final destination of these cargo ships.

Reports are that these delays have already been felt by European retailers like Ikea and Next. On top of that, freight rates have risen significantly in the wake of the Houthi attacks. Economists warn that all of this is disrupting the global economy and could cause new inflationary pressures.

One of the Maersk ships – the Hangzhou was attacked – and that spooked the company. While Maersk indicated that it understood the impact the action may have had on logistic operations, it felt the revised travel route was necessary.

In light of the increased tensions and military activity in the region, the World Shipping Council and the International Chamber of Commerce, along with the Baltic and International Maritime Council, all condemned the Houthi attacks.

Hapag Lloyd instituted a short term workaround for shippers by introducing a shuttle service transporting Red Sea cargo via Jeddah. The feeder service has been arranged so that cargo from Aqaba, Jordan and Port Sudan, Sudan will be routed via Jordan.

POSTSCRIPT: 25 incidents have occurred. Costs have risen because of the attacks. It is an intolerable situation. A feeder service has been started so that cargo headed to Aqaba, Jordan and Port Sudan can be routed via Jordan but that clearly will not relieve all the growing pressure on shipments. It remains a volatile and risky situation that may have long-lasting consequences on freight flows.

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