Corporate Moving — Trade and shipping shifts in the Red Sea region

By Santa Fe Relocation

Posted 17 Jan 2024

As we closely monitor the ongoing developments in the Red Sea region, we bring you the latest updates on the situation and its implications for global trade.

Shifting shipping routes

Recent data reveals that 80% of ships have avoided the Red Sea passage altogether. This significant shift in shipping routes underscores the gravity of the situation in the region.

International concerns grow

There is a growing international concern over the threats to vital waterways, especially the Red Sea and the Suez Canal. Closing these critical passages due to Houthi attacks may take months to reopen, causing disruptions that ripple through the global supply chain.

Inflationary impact looms

The situation in the Red Sea is beginning to have an inflationary impact on costs, affecting not only carriers but also customers and consumers in Europe and the U.S. The potential increase in costs and delays is a significant concern. If the situation remains unresolved, it could lead to significant disruptions at the end of January and February and into March, impacting both industries and end consumers. Notably, rerouting around Africa can extend shipping times by up to 50% compared to the usual Suez Canal route, though the exact increase may vary depending on specific circumstances.

Operational strategies of carriers

Interestingly, despite the challenging conditions in the war zone, there appear to be minimal alterations in the operational strategies of major carriers. Companies like CMA CGM and COSCO continue to evaluate each situation individually, with many large vessels still traversing the Red Sea. Niche carriers also maintain their regular operations and while adhering to a round-Africa policy, Maersk continues to operate U.S. Flag vessels as an exception. This underscores the complex dynamics in the region.

Shipping lines’ stance

Major container shipping lines, as of now, have not officially changed their positions. Continuous monitoring and adherence to naval commands remain crucial as the situation remains dynamic. The recent show of force from the West has not resolved the shipping problem.

Carrier-specific decisions

It is important to emphasise that carriers’ decisions apply exclusively to the ships they operate. Even if a shipping line indicates they will use the Red Sea route, there is no guarantee they will follow through due to the dynamic nature of the situation. Here’s a summary of their current stances:

Carriers avoiding the Red Sea

MSC
Hapag Lloyd
EVERGREEN
Yang Ming
Maersk

Carriers with a case-by-case decision

CMA CGM
COSCO
ONE

Cost and timing implications

Due to the volatile situation, changes may occur between the initial quote and the final cost. Customers should be prepared for potential adjustments.

Port congestion and container shortages:

These diversions in shipping routes may result in port congestion, as facilities unaccustomed to handling considerable traffic experience increased activity. Additionally, there is the potential for a shortage of vessel space, with empty containers stranded in unconventional locations. Such complications could exacerbate delays and extend their impact to other shipping routes beyond Europe and Asia.

In conclusion, heightened tensions in the Red Sea region continue to create a dynamic and evolving situation that necessitates proactive maritime measures. As the situation unfolds, we remain committed to informing our clients with the latest information and solutions, ensuring a seamless and successful relocation experience despite these global uncertainties. Stay tuned for further updates as we navigate these challenging times together.