The global shipping situation remains urgent. So far, due to the threat of attacks by Yemeni armed militants in the Red Sea region, shipping shippers have diverted their routes from the Red Sea route, and approximately $30 billion worth of goods have been rescheduled for new routes.
Since the Israeli Palestinian conflict in October, the waters in the Middle East have been hit 15 times, directly causing some shipping companies to change their shipping routes.
The Red Sea is an important waterway for global shipping, almost directly related to the Suez Canal. It is crucial for freedom of navigation and is also a major commercial corridor for promoting international trade. Just last weekend, several shipping giants announced the suspension of the Red Sea route.
For Europe, they clearly rely more on the Suez Canal, so the suspension of the Red Sea Suez route has a more significant impact on Europe.
For the United States, there are various modes of transportation for trade, either from Asia to ports on the West Coast, or crossing the Panama Canal to ports in the Gulf of Mexico and the East Coast. However, due to the low water levels experienced by the Panama Canal for several months and the risk of disruptions to its waterways, shippers have instead opted to book ships on the Suez Canal as a way to head towards the east coast.
Diversion plan
The Red Sea route is no longer safe, and many shipping companies choose to divert to Africa, taking a detour from the Cape of Good Hope in southern Africa.
Paolo Montrone, Senior Vice President and Global Trade Maritime Logistics Director of Kuehne+Nagel, a German freight forwarding company, said that currently, 57 container ships have diverted from the Red Sea and Suez Canal waterways to bypass Africa.
Montrone said, "As more and more people choose this route, this number will continue to increase... The total container capacity of these ships is 700000 20 foot standard containers (TEUs)."
Antonella Teodoro, senior consultant at MDS Transmodal, a shipping data company, added that each of these containers is worth approximately $50000. This means a total of $35 billion in goods have been transported.
However, changing lanes will inevitably bring about an increase in time and cost. C. Matthew Burgess, Vice President of Global Ocean Services at H. Robinson, stated that depending on the speed, bypassing the southernmost Cape of Good Hope in Africa will increase the range by approximately 3400 nautical miles, or an additional 14 days.
According to Paul Brashier, Vice President of Transportation and Multimodal Transport at ITS Logistics, the company is telling its US clients that the situation in the Red Sea and Suez Canal is deteriorating, and resolving the problem may take weeks or even months.
"We suggest that shippers who use the Suez Canal to transport goods from Southeast Asia to the United States consider booking a trans Pacific route to the West Coast of the United States," Brashier said
Brashier also suggests to American customers that, for cost considerations, any container heading east can be transported by rail or truck.
Port congestion risk
Global shipping companies are explaining to shippers that their shipping schedules may face delays due to the threat of attacks.
Maersk is one of the four shipping companies suspended from operating at the Red Sea Fleet, and according to CEO Vincent Clerc, there is expected to be a delay of two to four weeks.
The delay of ships poses a congestion risk to the port. According to Montrone, due to updates in arrival time and planning requirements, port authorities expect congestion to occur soon.
SEKO Logistics informed US clients that the expected delay time for East Coast cargo is approximately 10-14 days, and if a large number of ships arrive outside their respective berthing windows, the port may be further congested and delayed.
In addition, C H. Matthew Burgess, Vice President of Robinson, said, "Suspending transportation and extending transportation time may also put pressure on global capacity, not just in the Red Sea region, which could lead to shipping companies increasing freight rates and war risk surcharges."
He also pointed out, "In such interruption events, emergency planning is crucial. We are not only considering the transfer or delay of sea transportation, but also developing strategies such as what this means for inland transportation, inventory, and manufacturing demand."
Adjusting the shipping network
"Besides changing routes, shipping companies can also start adjusting their shipping networks," said Teodoro, senior consultant at MDS Transmodal
Teodoro also emphasized that the interruption of the Suez and Panama canals highlights the need for an international authority to monitor how and at what prices capacity is provided if we want a more resilient global supply chain.
But adjusting the shipping network is tedious. Teodoro pointed out, "Transferring/adjusting takes time and incurs costs, which is understandable."
Montrone, Vice President of Dexun, also reminded, "The situation is very unstable, and the reconfiguration of these networks is very complex, so we can expect a certain degree of interruption. In Asia, the lack of empty containers will become a potential problem, as relocating empty containers to demand areas will take 10-20 days."