Red Sea diversions disrupt China’s car supply chains

Carmakers had been struggling with a lack of car carrier RoRo capacity before the Houthi attacks began in the Red Sea and now with NYK and K Line suspending sailings via the Suez Canal nearly all big car car-carrier operators are diverting round the Cape of Good Hope, further reducing already squeezed capacity on the key trade route.

The boxlike RoRo car carriers ship thousands of vehicles and are vital in transporting cars between key Japan, China, South Korea and European markets, with long-distance ocean car shipments up 17% in 2023, largely because of big increases in exports from China and comes after large numbers of car carriers were scrapped during a market downturn in 2020. 

The extra 3,500 miles around the Cape means car makers will be able to transport fewer vehicles annually, as the global fleet’s effective capacity is cut and the 185 new vessels on order with shipyards this year are expected to increase fleet capacity by only 7%.

China may have overtaken Japan as the world’s largest auto exporter in 2023, with car exports jumping 62% to a record 3.83 million vehicles last year, but the shortage of seaborne capacity is putting the brakes on their ambitions in the UK and Europe.

With a few exceptions there is no immediate prospect that car carriers will return to their traditional Suez Canal route until they believe there’s a safe transit and with the current threat in Yemen, it is not felt that any military protection will be sufficient.

With about 25% of global, long-distance RoRo seaborne movements of cars typically moving through the Suez Canal, only container shipping is suffering bigger a upheaval as a result of the current problems in the Red Sea. 

However, the challenges for car-carrier operators are fundamentally different from those for container lines because there was a global excess of container ships before the latest crisis and container shipping lines have been able to reactivate idle ships to replace the capacity lost to longer journeys. 

While car companies have built up some extra inventory in key markets over the past year, they will run those stocks down as new vehicle deliveries from Asia are cut.

If you have questions or concerns about your automotive supply chain, trade with the Middle East, Africa, Indian Sub and beyond or any of the issues outlined here, please EMAIL our Automotive team who are standing by to assist.