Shipping companies reroute around Red Sea attacks, further tying up global supply chains
Safety first… To protect their crews and cargo, four out of five of the world’s largest shipping cos — including Maersk and Hapag-Lloyd — have adjusted routes or pulled their container ships from the Red Sea, a critical trade corridor that leads to the Suez Canal. The reason: Houthi militants have attacked at least 10 ships in the region, with two new incidents on Monday. (No injuries were reported.) The Houthis say the attacks are in protest of the Israel-Hamas war, and the Suez is just 130 miles from the Gaza Strip.
Vital: Roughly 12% of global trade passes through the Suez Canal — or nearly $10B worth of consumer goods, food, and oil every day.
Wide berth: Normally about 50 ships cross the Suez daily, but by Monday dozens had opted to go a different way. BP became the first major oil co to say it’d restrict its ships from the trade artery.
Rerouting the reroute… Ships transporting goods from Asia to Europe and the US are now facing a double bottleneck: traffic is still restricted through the drought-stricken Panama Canal, which normally handles 5% of world trade. The other option is to go around Africa’s Cape of Good Hope, a journey that adds weeks and millions of $$ in fuel costs to every trip. Some ships are taking the scenic route, while others are waiting out the Red Sea tensions.
Countries work together in their best interests… The ultimate cost of the shipping cos’ reroutes will depend partly on how long they last (some shipping rates are already up 20%), and several countries are banding together to make the Red Sea safe ASAP. On Monday, the US announced it was creating a task force with the UK, Canada, Bahrain, and six other nations to protect ships. But with Maersk announcing it was going the Cape Hope route, even after the coalition was announced, it’s clear some companies would rather keep playing it safe.