Red Sea Situation: major shipping companies halt vessels and avoid route following attacks

Update February 26:

Since the beginning of the attacks on commercial ships in the Gulf of Aden and the southern Red Sea in November 2023, the overall situation has remained largely unchanged. Yet, it seems that global maritime freight has adapted due to sufficient overcapacity to absorb disruptions.

Despite a US-led military operation in the Red Sea, Houthi rebel attacks on commercial vessels continue. As a result, the Suez Canal remains an unviable trade route, and almost all lines now run via the Cape of Good Hope. Only a few Chinese shipping companies still opt for the Red Sea route.

The additional travel time of 7-14 days via the Cape of Good Hope has increased the global demand for cargo capacity. However, structural overcapacity in the market easily meets this demand. This means that, despite the longer transit times, the rotation of container ships is stabilizing, and the previously predicted port congestion has not yet occurred.

Sea freight rates, partly due to the Chinese New Year, rose at the beginning of the year. In recent weeks, these rates have stabilized. We do not expect rates to quickly return to pre-Red Sea situation levels, but it is also unlikely that shipping companies can maintain current rate levels.

Three months into the crisis, a definitive solution does not yet appear to be in sight. As long as the Houthi rebels continue to attack and threaten cargo ships, it is not expected that the route via the Suez Canal will be resumed.

At DSV, we remain in close contact with our carriers to handle the situation in the best possible way and minimize the impact on your business. We continue to monitor developments and will keep you informed if the situation changes.

We appreciate your understanding under these critical circumstances. Should you need detailed information about routing schedules, etc., please contact your local DSV representative.

Update January 19:

With last week's air and missile attacks in Yemen, the conflict has escalated further. At present, all cargo related to the Suez Canal is being directly affected. This could impact more than 550 vessels, but it will also have consequences for other trade sectors.

Freight rates for ocean shipping are rising significantly. This is mainly the case for trade routes from Asia to Europe, but we are now also seeing indirect effects due to a shortage of equipment and available ships. This could even lead to congestion on other trade routes that are not directly related to the Red Sea, such as the trans-Pacific or trans-Atlantic routes.

Additionally, the upcoming Chinese New Year, which occurs starts at February 9, is causing a limitation in available capacity. Shipping companies have indicated that, due to the diversion via the Cape of Good Hope, they expect a capacity shortfall of about 40% during the last two weeks of January. This is typically the busiest time of the year.
Given the situation, we advise you the following:

• Focus on securing capacity and service for now or wait until after the Chinese New Year when more capacity may become available. 
• Extend your delivery times. Depending on the origin and destination, it is advisable to add an extra 10 to 15 days to your existing schedule. 
• Increase your budgets for transport costs. The priority for the coming months is to obtain capacity. 
• Book freight at least four weeks in advance to ensure equipment and capacity. 
• Postpone launching ocean freight tenders until after the Chinese New Year. New sailing schedules will then be available, including routes via the Cape of Good Hope, and new services and routes will have been established. 
• Consider alternative routes and modes of transport, such as the option of switching from sea to air transport or exploring different multimodal possibilities.

At DSV, we maintain close contacts with the shipping companies to handle this situation in the best possible way and to minimize the impact on your business. We will keep you updated as the situation develops and appreciate your understanding in these critical circumstances.

Please contact your DSV representative for more information about our alternative solutions.

Update December 18:

At DSV we are carefully monitoring the escalated security situation in the southern Red Sea and Gulf of Aden. In response to recent attacks on commercial vessels in the area, several carriers have paused or rerouted operations through the Red Sea, east and west bound, until further notice.

Pending a joint naval response to safely restore container traffic through the Red Sea, the current situation is that the Suez Canal is effectively closed to commercial shipping. This means that all standard routes through the Suez Canal have been halted or diverted around the Cape of Good Hope, resulting in an additional 10-14 days per voyage.

Coupled with the severe drought in the Panama Canal, the expected short- to medium-term consequences of the current disruptions are numerous and include increasing port congestion, a growing shortage of equipment, and the introduction of additional surcharges by carriers due to higher fuel and insurance costs. The longer journey around the south of Africa, adding 3,500 nautical miles, will also impact the carbon emission tax from shipping.

At DSV, we continue to stay in close contact with our carriers to manage the situation as effectively as possible and to minimise the impact on your business. We will keep monitoring developments and keep you updated as the situation changes.

We appreciate your understanding during these critical circumstances. Should you require further information, please contact your local DSV representative.