A little more than 10 percent of global trade passes through the Suez Canal each year, secured in containerized cargo ships that use the canal as the quickest route between Asia and Europe. Last fall, ocean shipping companies operating near the Red Sea and the Suez Canal repeatedly came under attack from Houthi rebels. Due to these attacks, the Suez Canal saw a 28% drop in volume year-over-year in the ten-day period ending Jan. 2. Despite some international efforts to create safe passage for ships, the best route for cargo more than a month and a half later is still transiting around the Cape of Good Hope, a journey that can add two weeks to each voyage.
To gain further perspective on the evolving situation, Vizion has gathered three industry thought leaders for the roundtable panel “Expert Insights into the Red Sea Crisis & Its Impact Beyond the Middle East.”
Register now for the January 31 webinar featuring Kyle Henderson, Vizion’s co-founder and CEO; Lars Jensen, CEO and partner of Vespucci Maritime; Pierre Garreau, CEO and co-founder of SeaRoutes; and the Journal of Commerce’s Eric Johnson.
The Crisis Until Now: Shippers & Carriers Alike Struggle to Adapt
To remove their vessels from harm’s way, shipping companies have been redirecting cargo on a much longer journey to Europe. That’s easier said than done, as changing routings for hundreds of ships and moving them to longer journeys requires renting more ships to carry the same amount of goods. All of this results in higher costs for shipping companies, and these fees will be passed down to shippers. Maersk and other carriers are doing this through temporary shipping surcharges.
The cost of shipping is but one impact of the Red Sea crisis. The longer-term challenge might be the diversion’s overall strain on the global economy. The current Suez Canal situation is the most significant supply chain disruption since the vessel Ever Green blocked the same channel in 2021. The impact of current events on the supply chain already outweighs the early shutdown portion of the pandemic. The true impact on consumers is yet to come.
Industry Experts on the Crisis in the Red Sea
Kyle Henderson, Lars Jensen, Pierre Garreau, and Eric Johnson have all been leading voices during the Red Sea crisis, helping carriers, their customers, and the industry at large keep up with the quickly evolving crisis and its impacts on global shipping.
As Crisis Worsens, Experts Warn of the Conflict’s Effect on Ports
In a LinkedIn post, Jensen pointed out how the Red Sea crisis could easily start impacting nearby ports, widening the impact on global shipping.
“Given the escalation over shipping in recent weeks, there is a risk that the conflict could expand to involve seaports in the region. These could be subjected to drone or missile attacks under the pretext that some of the ports are used for logistical purposes by the naval forces in the region who are attacking the Houthis,” he wrote.
“Or such attacks could have the pretext that vessels with Israeli, US, or UK ties are sitting at berth discharging cargo, which could be used in the efforts against the Houthis. Missiles or drones could then be aimed at such vessels sitting at berth.”
Container Rates Skyrocket, With No End to Conflict in Sight
Henderson began early on tracking how the Red Sea crisis has been impacting freight shipping rates, noting that “shipping costs are rising in accordance with the disruption.” In the middle of August, shipping companies ferried nearly $2.5 billion through the Suez Canal; by the end of December, nearly all of that cargo had started traveling around the Cape of Good Hope.
Vizion continues to track vessels' movement from the Suez Canal to the Cape of Good Hope, sharing that information via a public portal that tracks each vessel’s latitude and longitude in real time, as well as the vessel’s heading and the IMO number.
Amid Historic Disruption, Focus on Sustainability
Somewhat lost in the discussion of the impacts the Red Sea Crisis has on global shipping is the threat to supply chain sustainability efforts. Adding 3,000 nautical miles to a voyage significantly impacts GHG emissions. This mass re-routing is also steering focus away from a push toward greener ocean shipping, a quest that was finally gathering steam.
At Searoutes, Garreau is keeping a close watch on the greenhouse gas emissions impact of the reroutings while calling for standardization in how the industry reports such emissions. Looking at three carriers, he points out that in their differing carbon calculations, “HMM, Yang Ming and ONE … will produce different figures depending on the distance, the utilization factor and the emission factor used.” This is clouding the true emissions cost of the Cape of Good Hope reroutes.
Register now for the Red Sea Crisis Roundtable Webinar
To hear more from supply chain and logistics experts about the long-term impacts of rerouting vessels around the Cape of Good Hope, join Vizion for its January 31 webinar at 1 p.m. Eastern. Register now to hear from Kyle Henderson, Lars Jensen, Pierre Garreau, and Eric Johnson.
