Shipping companies are moving away from the Red Sea yet again. This time the problem isn't a blockage but bombs.

March 2021 saw the container ship the Ever-Given run aground in the Suez canal for 6 days. The disruption to international trade and markets was much longer lasting. Nearly 3 years later the compensation court cases are ongoing.

2023 Houthis rebels in the west coast of Yemen are taking terrorist action against shipping in the Red and Arabian Seas. They claim this is as a result of the Israeli bombardment of Palestine. Some vessels have been hit.

Initial reports suggested the terrorists were targeting ships with any connection to Israel. However, as time has passed, it appears as if there is no target plan, all ships are at risk. A Norwegian tanker was hit after apparently ignoring Houthis radio messages.

Several companies have now decided to take the long way round to Europe. South round Africa via the Cape of Good Hope and back up North. An additional 9000Km (5500 miles) and 6 to 14 days extra.

This additional distance and time will add to the cost of transported goods. Be it oil, gas, cars or bath rubber ducks, everything going through the Red Sea Suez route will now likely to go up in price.

10% The extra time also means each ship will be able to make less journeys per year. So there will be less cargo transported and therefore a shortage of cargo space. Whenever there is a shortage of something, even a shortage of space on a boat, the price goes up. The extra journey could put as much as an extra 10% requirement on sea freight.

The USA is organising a task force from several countries, including the UK, France, Canada and others. Escorted convoys of Naval ships and cargo ships will make their way from the Arabian Sea to the Suez. This will still cause long delays, waiting for ships to be assembled in to a suitably sized and protected convoy. No doubt waiting for a number of cargo ships to arrive before departing with each convoy group.

Short term this will be manageable, but in the longer term, this issue will effect everyone.

Even with Naval protection, will shipping companies be comfortable with sending their cargo, ships and personnel in to such hazardous conditions? Many may opt for the safer if more financially costly option of a trip round Africa. Shipping company customers, investors, shareholders and insurers will all have a view on the best course.

About The Author
Ralf Siegmann
Chewells Contributor

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