RED SEA AND SUEZ CANAL UPDATE
Six of the largest shipping companies recently announced they have rerouted or paused operations in the Red Sea shipping lanes until further notice due to several missile attacks on container vessels last week. German-owned Hapag-Lloyd and French carrier, CMA CGM have declared that the situation in the Red Sea and Suez Canal constitutes a force majeure. Carriers are actively seeking options to keep the global supply chain moving despite this newest disruption.
“Force majeure is a contract clause that goes into effect when any condition or set of circumstances, such as earthquakes, floods, or war, beyond the carrier’s control prevents the carrier from performing fulfillment of their obligations.”
CONTAINER VESSEL OPERATING STATUS
Vessels will either be rerouting away from the Red Sea to make the longer trek around the Cape of Good Hope Africa – adding significant time to each voyage, while other ships are waiting until the situation resolves, or ceasing operations to and from Israel for the foreseeable future. Additional shipping companies are expected to follow suit.
“We have faith that a solution enabling a return to using the Suez Canal and transiting through the Red Sea and Gulf of Aden will be introduced in the near future, but at this time it remains difficult to determine exactly when this will be…getting vessels moving via the Cape of Good Hope will ultimately be a faster and more predictable outcome for customers and their supply chains.”
Maersk Customer Advisory
The following lists provide status of carrier operations in the Red Sea and Suez Canal region as of the time of this posting:
1. Rerouting around Cape of Good Hope
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- CMA CGM – All vessels currently sailing to and from the U.S., North Europe, and Asia/Indian Subcontinent are rerouting their voyages.
- Hapag-Lloyd
- Maersk
- MSC
2. Waiting until the situation is deemed safe to resume operations
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- CMA CGM – All vessels in the area that are scheduled to pass through the Red Sea have been instructed to find safe harbor and pause their voyages until further notice.
3. Ceasing vessel operations to and from Israel until further notice
IMPACT ON U.S. SHIPPING
The impact on shipping schedules, particularly for the nearly 20 weekly container shipping services on the Asia-Europe trade, poses challenges for carriers in recovering lost schedules and minimizing disruption for shippers.
“The Red Sea is a critical waterway that has been essential to freedom of navigation and a major commercial corridor that facilitates international trade. I am announcing…Operation Prosperity Guardian, an important new multinational security initiative under the umbrella of the Combined Maritime Forces and the leadership of its Task Force 153…[that] is bringing together multiple countries to include the United Kingdom, Bahrain, Canada, France, Italy, Netherlands, Norway, Seychelles and Spain, to jointly address security challenges in the southern Red Sea and the Gulf of Aden, with the goal of ensuring freedom of navigation for all countries and bolstering regional security and prosperity.”
Lloyd J. Austin, III | U.S. Secretary of Defense
Expected international shipping impacts include:
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- Shipping times may increase by 15-20 days.
- Panama Canal congestion is expected to compound longer transit times as to longer transit times.
- High demand during the Chinese Lunar New Year season will likely lead to short-term price increases and longer transit times.
SUEZ CANAL RATE INCREASES
As vessels opt for the alternative route around the Cape of Good Hope, shipping costs are anticipated to increase by 15 to 20%, even after offsetting Suez Canal toll fees between of between $400,000 and $700,000 per ship per transit with a 15% rate increase expected in January.
While longer lead times may be expected due to extended voyages, the availability of excess capacity is likely to mitigate significant spikes in freight rates, providing carriers with options to manage the challenges posed by the rerouting of container ships around southern Africa.
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