Vessel rerouting, prompted by attacks in the Red Sea, disrupts global supply chains

FILE PHOTO: Containers are seen stacked up on the container ship MSC Maria Elena at the port of Antwerp, Belgium September 23, 2022. REUTERS/Yves Herman/File Photo

Attacks to vessels in the Red Sea by the Yemeni Houthi militant group aligned with Iran  are disrupting global maritime trade. To avoid the Suez Canal, major freight firms, including MSC, are rerouting around the Cape of Good Hope.

The Houthi group claims these attacks are in response to Israel’s actions in the Gaza Strip. Industry analysts expect increased costs and delays as about 15% of world shipping traffic usually transits via the Suez Canal, the shortest route between Europe and Asia.

Several leading freight companies, controlling around half of the global container shipping market, have diverted vessels, leading to longer travel times and higher costs. BP temporarily halted transits through the Red Sea, raising concerns about the impact on energy shipments. The conflict’s broader implications are causing companies to reconsider connections with Israel, as seen with Taiwan’s Evergreen Marine temporarily suspending acceptance of Israeli cargo.

The war between Israel and Hamas, ongoing since October 7, has geopolitical ramifications, involving the United States, its allies, and Iran-backed paramilitary groups. The Houthi attacks prompted discussions among the U.S. and its allies about a task force to protect Red Sea routes, though Tehran warned against such a move.

The diversions are adding at least a week of sailing time for container liners, causing delays and potential knock-on effects in the coming months. While freight rates may increase, carriers are currently exploring ways to utilize excess capacity. Shipping stocks rose on European exchanges, reflecting optimism about increased rates due to the shift away from the Suez Canal.

The International Chamber of Shipping association has labelled the Houthi assault on shipping lanes as an “extremely serious threat to international trade” and urged naval forces to take action to prevent further attacks. U.S. Defence Secretary Lloyd Austin’s visit to the region underscores the significance of the situation.

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