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Major ocean carriers suspended Red Sea transits due to security threats, impacting global trade flows
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Anticipated rate increases announced, with about 25% of effective capacity potentially removed from impacted markets
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Re-routing around the Cape of Good Hope extends transit times by 7-10 days, affecting vessels moving goods from Asia to Europe and the eastern United States
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Alternative options for US East Coast imports recommended, including transloading via rail or truck and utilizing limited capacity through the Panama Canal
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Flexport advised shippers to stay informed, work closely with account teams, and proactively plan shipments 4-6 weeks in advance to navigate potential disruptions
In response to recent drone and missile attacks on commercial ships in the Red Sea and Bab-el-Mandeb Strait, major ocean carriers are taking precautionary measures to ensure the safety of their crews. This has led to the decision by several carriers to either re-route or entirely halt vessels, creating a significant impact on global trade flows.
Ocean freight experts worldwide are closely monitoring the situation and have provided daily updates and forecasts on the unfolding events.
As of December 18, all major ocean carriers, with the exception of OOCL and COSCO, have announced the suspension of vessels bound for the Suez Canal via the Red Sea and Bab-el-Mandeb Strait. This move comes in response to heightened security concerns and the imperative to safeguard the well-being of crew members.
Anticipated rate increases and global trade impact
Carriers have already begun announcing expected rate increases as a result of the situation in the Red Sea. In a company blog published on December 18, Flexport’s Anders Schulze, SVP, global head of ocean freight; Kyle Beaulieu, senior director, head of US trade; and Nathan Strang, director, ocean freight, US southwest & SMB wrote that approximately 25% of effective capacity could be affected in impacted markets, leading to a surge in rates, particularly with the increased demand from the pre-Chinese New Year peak season.
They predict that rates are likely to rise significantly and rapidly unless the situation is swiftly resolved.
For comparison, rates on the Asia to North Europe trade lane for January 1 have been announced at more than $3,000 per container. If 25% of global capacity is removed due to re-routings, it may cause an equipment shortage on the Asia to Europe trade lane in late January, possibly leading to higher prices due to limited supply, Flexport said.
Impacts to global transit times
Flexport experts added that the decision to re-route vessels around the Cape of Good Hope is expected to prolong transit times by 7-10 days, depending on the vessel’s location when the re-routing decision is made.
For example, the route from Shanghai to Rotterdam via Suez covers approximately 11,000 nautical miles, while the Cape of Good Hope route spans around 14,000 nautical miles. This re-routing is estimated to extend transit times by 8-10 days.
Shippers should be aware that vessels already at the Red Sea that need to be re-routed can expect transit times of approximately 14 days due to the additional travel from the Indian Ocean to the Red Sea and then from the Red Sea to the Cape of Good Hope.
Alternative options for imports to US East Coast
For US importers facing disruptions due to the situation, the experts said alternative options are recommended to keep goods moving efficiently. Options include booking ocean freight shipments to the US West Coast and transloading via rail or truck to the final destination. Limited capacity for shipments to transit the Panama Canal remains a viable route for many US importers despite low water levels and reduced traffic.
Flexport emphasized the importance of considering premium or expedited services for time-sensitive shipments, particularly those originating from Central and South China.
As rates are expected to increase significantly, importers are encouraged to work closely with their supply chain and logistics partner’s account team to explore alternative routings and keep shipments moving.
Current situation and recommendations
CMA CGM is the latest global ocean carrier to announce the suspension of vessels bound for the Suez Canal via the Red Sea and Bab-el-Mandeb Strait, joining Maersk, MSC, Hapag-Lloyd, and Zim. Collectively, these carriers account for 70% of Suez Canal-bound capacity.
As the situation evolves, Flexport recommended the following for shippers:
For current shipments on the water, Flexport will provide updates as carriers assess the situation and evaluate options.
Shippers with currently booked shipments are advised to keep expected plans and push to load on schedule. While total transit might be delayed by 7-10 days for cargo going to the US East Coast, maintaining scheduled load plans in December is recommended.
Looking ahead, Flexport suggested booking cargo 4-6 weeks in advance to navigate potential disruptions. The combination of slowdowns along the Panama Canal, the current situation in the Suez, and the upcoming Lunar New Year in February necessitates proactive planning.
The global logistics landscape is facing uncertainties due to the recent events in the Red Sea, and the impact on international shipping remains to be fully determined.
The Suez Canal, a critical artery in global logistics, plays a pivotal role in facilitating the movement of container vessels and goods worldwide. As seen in the MV Ever Given incident in March 2021, disruptions can cause global backlogs and shipping delays, underscoring the importance of staying informed and adapting to the evolving situation.
Flexport is a modern international freight forwarder and logistics platform based in San Francisco, California. They leverage technology to streamline and simplify the complex process of global shipping and logistics. The company offers a range of services, including freight forwarding, customs brokerage, and supply chain management.
