Red Sea situation latest @ 1st February 2024
The Houthi rebel attacks against commercial shipping in the Bab al-Mandab Strait approach to the Suez Canal, that began in December 2023, shows no sign of ending and all major container shipping lines are taking the 3,500 mile diversion around the Cape of Good Hope until maritime security can be guaranteed.
The effective closure of the Suez Canal to container shipping has suddenly lengthened supply chains to and from Asia by 7-10 days, which means that vessels up to, for example, week five will arrive on time in Asia but the vessels that were supposed to arrive in week six and onward are all delayed by one to two weeks.
We are expecting a significant impact on departures from Asia to Europe, with approximately 40% to 50% of shipments missing in weeks six and seven, causing disruptions in the return supply of equipment to Asia.
With less available vessel capacity and 40% more fuel required to sail around the Cape sea freight rates are expected to continue rising, albeit at a slower pace, leading up to the Chinese New Year holiday and while we can anticipate some stabilisation in the traditionally quieter period after CNY, much will depend on vessel capacity utilisation and demand.
The duration of the disruption is the key unknown, but there is no indication of the Red Sea situation cooling down at this time and the carriers currently estimate that we may not see any easing of the situation until at least the second quarter.
The expected effect on equipment shortages, port congestion and ship schedules could be sharp, though hopefully short-lived, as supply chains reorganise around the longer transit times of sailing around the southern tip of Africa.
Freight rate levels will remain elevated beyond the first quarter as carriers’ operating costs have increased substantially, driven by greater bunker consumption.
It will take them time to reposition vessels, so capacity disruptions will be worse at this stage, but things should ease as networks recalibrate for planned diversions.
The longer transit around the Cape of Good Hope is using up excess Asia/Europe capacity and even if the Suez had to be avoided for the rest of the year, it would only reduce effective capacity by 9%.
With the sea freight market still-heavily oversupplied, when trade does starts to flow back through Suez, the normal market dynamic will almost certainly snap back.
Space is becoming an issue on nearly all major trades and equipment availability is being impacted, which is why we would urge you to share your shipping deadlines, so that we can book your space at the best possible rates.
With Chinese New Year starting on Saturday 10th February, the cut-off for air freight from the region is fast approaching for all services. We have solutions for all your time-sensitive shipments, but it is critical that you contact us now, so that we can ensure your deadlines are all hit.
If you have any questions or concerns about the impact of the Suez situation on your Asia supply chain, or would like to discuss its implications, please EMAIL our managing director, Colin Redman.