The Red Sea crisis has been going on for two months and there is no end in sight. Shipping companies such as Maersk or, more recently, CMA CGM have stated that the uncertain situation caused by attacks on ships by Houthi rebels in Yemen could continue for months. Deadlines have forced many shipping companies to take action to reduce the impact of this situation on their logistics chains as much as possible, with the main measure being to increase the speed of their ships.
Because more and more shipping companies – one of the last, for example, Nippon Yusen, Japan’s most important company – are joining the decision to avoid the Red Sea, and with it the gateway to trade between Europe and Asia. They seek an alternative route along the African border until they pass the Cape of Good Hope on their journey – the Suez Canal. Without going any further, the latest data released by shipping lane tracking company Alphaliner showed that as of January 15, the crisis had caused 338 ships to divert.
More distance, more speed
This move to seek greater security in transit brings in turn a significant increase in the distance to be covered by ships (about 6,500 more kilometers) and thus a significant increase in the duration of the routes, adding another ten to twelve days. to travel. To minimize this situation, the option adopted by many shipping companies is to increase the speed of their ships. In particular, according to Alphaliner, shipping companies increased their average speed by up to one and a half knots, reaching 16.5 knots; This could – as explained in a report by Fundació Valenciaport – “reduce the shipping time interval to one week” compared to the original route through Suez. But this reduction in time also has consequences. Especially at the level of economic and climatic costs.
Because if choosing the African route already requires using 30% more fuel compared to the Egyptian canal and causes the same increase in pollutant emissions, as port sources explain, the increase in speed means a further decrease in the efficiency of ships and with it more consumption and costs for shipping companies. payment. The response of shipping companies to these increases has been to impose different surcharges, in some cases such as transit interruption surcharges (TDS) and emergency contingency surcharges (ECS). These are extras that have recently been added due to the high season (PSS) associated with the approach of Chinese New Year, which also puts pressure on the availability of containers in Asia. As the Credit and Alert report makes clear, with this scenario ocean freight rates have already increased by almost 300%.
Better location than Covid
But today, not all horizons point in the wrong direction. According to the Valenciaport report, this crisis in the Red Sea is occurring at a time when there are “certain signs of overcapacity” for the container market, which could mean its effects are “more contained” than the pandemic. -19. Of course, for now this situation allows shipping companies to withdraw both the idle fleet (reduced by 81,254 TEUs in the last two weeks) and container ships to guarantee their operations, according to Alphaliner statistics. were on maintenance duties, and during this period these duties decreased by the equivalent of 106,220 TEU.