The recent attacks in the Red Sea, threat to global shipping pose a potential reduction of up to 20%

The recent series of ship attacks orchestrated by Iran-backed Houthi rebels in the Red Sea has the potential to significantly impede global shipping capacity by approximately 20%, as indicated by experts. This development poses a renewed challenge to supply chains and has the potential to rekindle inflationary pressures. Notably, at least 200 containerships have already altered their routes, adding approximately two weeks to their transit, in an effort to circumvent the Suez Canal and the Red Sea, where the Houthis have escalated their attacks employing drones and missiles since the commencement of the Israel-Hamas conflict.

Containerships are responsible for 30% of cargo shipments, and these vessels collectively transport approximately $1 trillion worth of freight annually. An estimated 10% of this volume traverses the Suez Canal. Significant industry players such as Denmark’s AP Moller-Maersk, Germany’s Hapag-Lloyd, and France’s CMA CGM have opted to suspend navigation through the Red Sea, impacting over 1.6 million containers. In comparison to routes through the Suez, the journey between Asia and Europe via the Cape of Good Hope will entail an additional three to four weeks of shipping time, according to the same firm. Similarly, routes to the U.S. East Coast are expected to experience a delay of approximately five days. Early indications suggest that these disruptions are already influencing retail prices in the US, with delays of two weeks or more in transit times for retailers resulting in heightened rates.

Written by Ken Miller, President of StateWay Logistics