Attacks In The Red Sea Continue To Impact Global Trade

Almost 8 months on since the start of the Red Sea crisis and revenues of the Suez Canal have dropped 64.3% from where they were last year. Box throughput has been cut by 90% with just 1,111 vessels transiting the canal in May 2024 and shippers have seen fuel costs rise by an approximate $1 million due to re-routing vessels around Africa.

Despite the additional 11,000 nautical miles re-routing is causing, the decision remains a straightforward one. Houthi rebel attacks continue with one Greek-owned vessel, Tutor, struck by missiles on 12th June and its crew told to abandon ship.

The Houthis have been attacking vessels with alleged Israeli links in the Red Sea and Gulf of Aden since November 2023. They are a rebel group engaged in a war with the Saudi Arabian-backed government within Yemen and argue their actions are in solidarity with the Palestinians impacted by the Israel-Gaza conflict.

And yet, as of today their attacks have killed three merchant sailors and seriously damaged a significant number of vessels, impacting at least 65 countries. With many of these countries not seemingly connected to the conflict in the Middle East, it is apparent that the Houthi rebels either are not or cannot differentiate between targets and non-targets.

It’s partly for this reason that, despite the increase in fuel costs and transit time, shippers continue to prefer to divert around the Cape of Good Hope. But it’s also because the financial cost of travelling the Suez Canal outweighs that of the rerouted journey. The combined cost of crew bonuses, war-risk insurance and Suez transit fees are staggering.

Still, transiting around the Cape of Good Hope is causing costs to rise, and shippers aren’t immune to the increase. Typically, May and June are comparatively quiet for the sector, with a decline of 27.5% in shipping rates last year that led to container congestion at ports. Not this year.

In the same period in 2024 we’ve seen a shortage of containers at ports, leading some companies to purchase their own containers to address the shortage. This lack of space is driving demand and price hikes.

For this reason, the general advice for shippers seems to be to book space as soon as possible to ensure secure supply chains. Which, if this keeps up, could create the premature commencement of Christmas shipments as early as July.

If you’d like to know more about the Red Sea conflict, or how it is impacting global shipping, get in touch with a member of the team today.