SHIPPING and logistics companies are warning of delays and higher charges for Asia-Europe freight, as major shipping lines reroute from the Suez Canal to avoid Yemeni rebel attacks in the Red Sea.
At least one logistics player has advised its clients in all regions that vessels using South Africa’s Cape of Good Hope as an alternative route will add about 14 days or 30 per cent more time to voyage. It has also advised them to ensure they have enough stocks to tide them over.
This has prompted many shipping companies to suspend journeys through the key waterway, with the automotive and consumer goods sectors expected to be among the hardest hit.
“Sailing around Africa will also lead to increased demand for vessel capacity. This will lead to higher rates and, possibly, a better margin for shipping companies as well.
AP Moeller Maersk and Hapag-Lloyd suspended their Red Sea operations on Friday after their vessels became the targets of Houthi missiles.
They were joined by other major shipping companies, including CMA GGM and the Mediterranean Shipping Company.
The four companies collectively control about half of the global container shipping market.
Taiwan’s Evergreen said on Monday that it had temporarily stopped accepting Israeli cargo. It instructed its vessels to avoid passing through the Red Sea until further notice and directed them to go around the Cape of Good Hope.
British oil company BP also stopped all its operations through the Red Sea, which it called a “precautionary pause under ongoing review” due to the “deteriorating security situation”.
Analysis of more than 300 industrial categories and 6,000 products indicated that 14.8 per cent of all Europe, Mena imports were shipped from Asia and the Gulf by sea, according to S&P Global Market Intelligence.
That included 21.5 per cent of refined oil and 13.1 per cent of crude oil. Among industrial material imports, 24 per cent of organic chemicals and 22.3 per cent of flat-rolled steel destined for Europe and the Mena region were shipped from Asia and the Gulf.
“Just 8.6 per cent of total Asia and Gulf imports came from Europe and Mena by sea, though the automotive industry may face an outsize impact with 41.3 per cent of vehicles and 20.8 per cent of parts shipping on that route,” said Chris Rogers, head of supply chain research in global intelligence and analytics at S&P Global Market Intelligence.
The transport of goods with a short shelf life will be difficult on the longer alternative routes that vessels must now take and consumers will bear the brunt of the impact from the current disruptions.
“Shipments of perishable goods including … milk products may not be able to endure the longer routes,” Mr Rogers from S&P Global Market Intelligence said.
“Consumer goods will face the largest impact, although current disruptions are occurring during the off-peak shipping season.”
Christian Roeloffs, co-founder and chief executive of leasing company Container xChange, said shipping lines had been instructing their vessels to use the Cape of Good Hope, “adding quite a significant delay and time to their East to West trade journeys”.
“An additional 40 per cent longer route, causing heavy upward pressure in the operating costs, is expected to persist as the shipping time extends anywhere between one to four weeks.”
The Houthi attacks come at a time when the world’s other major waterway – the Panama Canal – is being severely restricted by drought.
Traffic via the Panama Canal is already limited and its restricted role as an alternative route is forcing all major shipping lines to opt for the Cape of Good Hope route or use trans-loading strategies such as transporting goods through rail between countries.
The crisis would lead to rising costs for the sector and consumers, as well as potential delays during the busy Christmas season, said Zarir Irani, managing director of Dubai-based shipping surveyor Constellation Marine Services.
