Shipping companies re-route vessels and impose surcharges

After a spike in attacks on commercial vessels, shipping firms are facing a difficult decision: they can send their ships through the Red Sea, risking attacks by Houthi rebels and inviting significantly higher insurance premiums, or re-route them around the Cape of Good Hope, adding 10 days to the journey and increasing fuel costs accordingly.

According to the New York Times, Yemen’s Houthi militant group has attacked two dozen commercial vessels since mid-November. These attacks —ranging from hijackings to drone and missile strikes— have continued even after a US-led multinational naval force was assembled to help safeguard commercial traffic in the region.

The most heavily affected exports are those originating from East or South Asia and destined for Europe or the East Coast of the United States.

The Red Sea disruption comes at a time when the global shipping industry was already facing significant delays. Amid historically low rainfall levels and a severe El Niño weather system, the Panama Canal was forced to reduce its daily transit capacity in the second half of 2023, generating knock-on effects throughout the global supply chain.

As of early January, marine traffic tracking websites continued to show dozens of vessels in the Red Sea, which connects the Mediterranean Sea to the Indian Ocean via the Suez Canal. However, some major players in the shipping industry have already significantly reduced their presence in the region. After an attack on one of its container ships in mid-December, MSC announced that it would avoid the area “until the Red Sea passage is safe.” After a similar attack, Maersk announced that it would avoid the route “until further notice,” according to CNN. In a statement on December 26, CMA CGM said that, although it had re-routed some vessels, it was also sending some ships through the Red Sea and was devising plans to gradually increase the number of vessels transiting through the Suez Canal.

In late December, Reuters reported that some of the world’s largest shipping companies planned to impose extra charges after re-routing ships around Africa in response to the Houthi attacks, adding to rising costs for maritime transport.

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