According to Michael Race, Business Reporter from the BBC, major shipping companies are rerouting journeys away from the Red Sea, potentially causing severe disruptions in global supply chains. Recent attacks by Houthi rebels in Yemen on commercial vessels have prompted these companies to avoid one of the world’s busiest shipping lanes.
The Houthi group, expressing support for Hamas, claims to target ships heading to Israel, although the destination of all attacked vessels remains unclear. The attacks have intensified since the start of the Israel-Hamas war in October, with the Houthis employing drones and rockets against foreign-owned vessels navigating the strait of Bab al-Mandab.
As a response to the escalating threat, leading shipping firms like Mediterranean Shipping Company and Maersk have opted for a longer route around Africa’s Cape of Good Hope, bypassing the Red Sea. BP has halted all oil shipments through the Red Sea, citing the “deteriorating security situation.”
The significance of this shipping route lies in its role as a crucial passage for ships traveling to or from the Indian Ocean via the Suez Canal. The Suez Canal, the quickest sea route between Asia and Europe, is vital for transporting oil and liquefied natural gas (LNG). In the first half of 2023, approximately nine million barrels of oil per day transited through the canal.
Analysts highlight that nearly 15% of goods imported into Europe, the Middle East, and North Africa are shipped from Asia and the Gulf by sea. This includes 21.5% of refined oil and over 13% of crude oil. Container ships, carrying a variety of consumer goods, are also impacted.
Chris Rogers, head of supply chain research at S&P Global Market Intelligence, notes that consumer goods will be significantly affected, with delays expected during the off-peak shipping season. Container ship journeys will take at least 10 days longer due to the Cape of Good Hope route, adding about 3,500 nautical miles and incurring additional costs for companies.
While shipping rates have risen by 4% in the past week, they still remain lower than the levels seen in 2021. Concerns linger about potential disruptions pushing up oil prices, impacting fuel costs and contributing to higher inflation.
In response to the attacks, the US has launched an international naval operation to protect ships in the Red Sea route, with countries like the UK, Canada, France, Bahrain, Norway, and Spain joining the effort. However, some shipping companies, including Maersk and Hapag-Lloyd, remain hesitant to resume using the Red Sea route immediately, despite increased security measures. The uncertainty suggests potential disruptions in global trade for an extended period.
