The Red Sea crisis is playing havoc on the shipping and logistics industry. Yet another ship has been affected by the crisis, with BBC News reporting a Greek vessel coming under attack on-route from Vietnam to Israel.
Shipping companies have been faced with the decision to re-route shipments. Freight forwarder WeFreight reports the fleet capacity that moved through the Suez Canal fell over 60% in the three-week period from December 18 to January 7.
The importance of the Red Sea in logistics
The Red Sea is a crucial corridor connecting the Mediterranean Sea, Indian Ocean and beyond. Its strategic location gives shippers access to Europe, Asia, and Africa. The Red Sea route is the natural sailing route between these regions.
The impact on business had been massive, with some shipping lines having to suspend routes and re-route vessel sailings to accommodate customers. To keep business moving, shipping companies have chosen to divert shipments around the Cape of Good Hope.
Hapag-Lloyd has taken the decision to avoid the Red Sea. “According to clause 18 of our bill of lading ‘Matters affecting Performance’ we have had to take the decision to avoid the Suez Canal and the Red Sea with immediate effect, and instead route our ships around the Cape of Good Hope.”
The shipping company has a live ticker of the situation in the Red Sea here.
While US retailer Target: Experiencing disruptions due to shipments from India and Pakistan.
Logistic industry affected by Red Sea crisis
Crown Worldwide Group is a logistics company that assists families with relocation. “Reports and analysis have indicated that re-routing via the Cape of Good Hope will prolong transit times by seven to 10 days, but that depends on where the vessel is when the re-routing decision was made. Some cargo may experience an even longer delay of two to four weeks if vessels have had to detour from the Red Sea.”
There are several ways logistics is being affected by the Red Sea disruptions:
- Freight rates on key trade lanes are on the increase, such as the Asia-Europe lanes.
- Additional surcharges are in place for those routes that are affected by the crisis. NNR Global logistics reports: “Carriers are unwilling to accept any mitigation in these surcharges for the carriage of cargo to reach its final destination.”
- Space and storage is a problem. Space onboard vessels has been affected on key lanes with many vessels fully booked for January.
ShippingWatch reported in December that shipping companies would still avoid the Red Sea even though warships were being sent to the region for security. On January 9, Locate2u News highlighted the surge in costs, with Christian Roeloffs, co-founder and CEO of Container xChange saying that recent disruptions are poised to escalate operational costs, adding significant strain, while concurrently exerting downward pressure on profits.
About the author
Sharl is a qualified journalist. He has over 10 years’ experience in the media industry, including positions as an editor of a magazine and Business Editor of a daily newspaper. Sharl also has experience in logistics specifically operations, where he worked with global food aid organisations distributing food into Africa. Sharl enjoys writing business stories and human interest pieces.
