Emergency Bulletin: Red Sea and Bab Al-Mandab Strait crisis update

The number of container ships diverting away from the Suez Canal and around the Cape of Good Hope had already reached 262 ships, or 12% of the global fleet by New Year’s Eve, rising a further 5% after the weekend’s Houthi attacks and will continue to grow until the Red Sea security situation is resolved. 

To put these figures into context; 17% of the global fleet diverting means that almost 4 million TEU of global container capacity is now delayed in transit. 

On trade lanes such as Asia-Europe, where all services would usually transit via the Suez Canal, the impact on available capacity is significant, and as a result rates are increasing rapidly.  

The SCFI index, which monitors spot rate development, reported gains of 80% in just one week, the largest week-on-week increase since the pandemic. Spot rates are now more than USD 6,000 per 40ft container, up some 220% compared to just one month ago.  

With vessel space and equipment availability expected to become more challenging in the coming weeks these elevated rates are expected to hold or even increase further.

The Asia-Mediterranean trade has also seen rapid rate increases, as vessels effectively take a more substantial diversion when transiting via the Cape of Good Hope, and back past Gibraltar into the Mediterranean. Spot rates as reported by the SCFI are now over USD 7,000/40ft, an increase of 177% compared to the start of December.

With the global container market being so interconnected, there is a knock-on effect to other trade lanes that are now already starting to feel the impact.  For example, carriers have announced surcharges on the trade between Turkey and North Europe as a result of the disruption to container flows and equipment re-positioning costs.

Also on the Transpacific trade, freight rates have risen to both the West and East Coasts, reaching their highest levels in over a year, and are likely to climb higher as capacity is expected to tighten from week 3, as carriers transfer ships to Europe, where the vessel shortage will become more acute.

With vessels diverting around the southern tip of Africa, those originally scheduled to return from Europe will be delayed by at least 2 weeks, with the largest drop expected in week 6 when weekly capacity will be down by approximately 30% compared to the current schedules.

Global port congestion, which appeared to have become a thing of the past, has climbed to an eight-month high. Rising above 2m TEU or 7.2% of the global fleet by the end of 2023, driven largely by an increase in congestion in North China ports, but the resulting bunching of vessels has also affected downstream ports such as Busan and Singapore.  

There are some minor congestion issues at various European and North American ports and while delays are currently manageable, more congestion is anticipated with the bunching ships diverting to the Cape route at the start of the week.

The timing of the current situation – the pausing of vessels, the subsequent rerouting and transit delays – could hit hard, when it coincides so closely with Chinese New Year. 

We are preparing everything that we can, with contingency planning to ensure operational issues are minimised and communicated to all our customers individually, with all available options and solutions to minimise the impact on your business.

We have formed a ‘Red Sea Crisis Task Force’ who are monitoring the situation, gathering all market intelligence, speaking with carriers and other sources, and ensuring that we provide the latest information as the situation continues to unravel. 

Our coverage is relentless, and we will continue to advise the latest situation, with agile solutions that can overcome every change in events. 

We ensure we are proactive and anticipate the issues before they occur and invariably have the platforms in place to avoid or mitigate the situation as they arise.

What we are experiencing now is similar to the pandemic evolution in logistics and the Suez Canal blockage over the last few years, only at a much quicker pace of disruption and impact. 

While many of the issues will only be felt and experienced in the coming weeks, due to the time lag between cause and effect, we are mindful to share this information with you now so that we can jointly plan and put under scrutiny any product movements that are essential.

We are always proactive and we will always have all of  the options available to mitigate impact of these events and supply chain challenges.

If you have any questions or concerns about the impact of the Suez situation on your Asia supply chain, or would like to discuss its wider implications, please EMAIL our Chief Commercial Officer, Andy Smith.