Global Shippers Bypass Suez Canal As Security Concerns Persist

The threat of attacks in the Red Sea has prompted half of the container fleet usually transiting the Suez Canal route to divert away from that route, with the number of vessels now traveling around Africa instead doubling from last week, according to data from Flexport Inc reported by Bloomberg.

This week, the number of container vessels that have already changed route or plan to alter course is double from a week earlier. The total of 4.3 million containers those ships can carry account for around 18% of global container capacity, according to the data.  

Earlier this week, some shippers, including giants Maersk, CMA CGM, and COSCO, partially resumed transit through the Red Sea, both eastbound and westbound, after to the launch of Operation Prosperity Guardian, a U.S.-led multi-national task force to protect the waters of the Red Sea and the Bab el-Mandeb Strait near Yemen from attacks from the Iran-aligned Houthi in Yemen. 

As of Wednesday, Maersk had scheduled some of its ships to continue via the Suez Canal, although some were diverted via the Cape of Good Hope in Africa. 

Oil prices fell on Wednesday and were also down early on Thursday as global shipping giants gear up to resume transiting the Red Sea despite an ongoing Houthi missile barrage.

While Maersk and others are resuming shipping in the Red Sea, using evasive maneuver, Germany’s Hapag-Lloyd said on Wednesday that it would not be following suit, deeming the Suez Canal route still too dangerous despite U.S. military protection, the BBC reports. Instead, the shipping giant will reroute vessels via the Cape of Good Hope, which adds 3,500 nautical miles to the trip and a concomitant increase in shipping costs. 

The repercussions of the conflict in the Middle East and the Houthi attacks in the Red Sea could still impact energy markets and supply chains worldwide and drive consumer prices higher, just as the Fed signaled a pivot in the U.S. monetary policy with the potential of three interest rate cuts in 2024.     

By Tsvetana Paraskova for Oilprice.com

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