The series of ship attacks by Iran-backed Houthi rebels in the Red Sea could curtail global shipping capacity by 20%, according to experts, in a fresh blow to supply chains that could reignite inflationary pressures.
At least 121 containerships are already taking longer routes to avoid the Suez Canal and the Red Sea, where the Houthis have been stepping up attacks with drones and missiles since the start of the Israel-Hamas war.
Containerships account for 30% of cargo shipments, and $1 trillion worth of freight is carried by those vessels every year. An estimated 10% of the volume passes through the Suez Canal.
Using the shipping database maintained by the London Stock Exchange Group (LSEG), Nikkei has mapped the recent movements of large ships that have docked in New York and Savanna, the port city in the U.S. state of Georgia.
About 300 ships have called at these two ports this month. A look at the ships’ positions as of Wednesday shows a large number of them taking detours around the Cape of Good Hope at the southern tip of Africa. Most of these vessels are containerships bound for Singapore and other destinations in eastern Asia.
Many of the ships that used the ports in New York and Savanna last month were seen headed to the Mediterranean Sea and the Red Sea as of Nov. 30, according to the LSEG data. Ships bound for East Asia in particular took the shortest route by passing through the Suez Canal and the Red Sea.
The comparison between the mapping data paints a clear picture of how shipping companies have been forced to change their routes after the Houthi armed group escalated its attacks on cargo vessels this month.
Large shippers such as Denmark’s AP Moller-Maersk, Hapag-Lloyd of Germany and French player CMA CGM have decided to halt navigation through the Red Sea. As of Wednesday, 121 containerships are taking detours, affecting 1.6 million containers, according to Swiss logistics firm Kuehne + Nagel.
Compared to routes through the Suez, the trip between Asia and Europe around the Cape of Good Hope will add an extra three to four weeks to shipping time, according to the Swiss firm. Routes to the U.S. East Coast would lag by an additional five days or so.
“The extended time spent on the water is anticipated to absorb 20% of the global fleet capacity, leading to potential delays in the availability of shipping resources,” said Kuehne + Nagel, adding that about 40% of containerships are experiencing delays.
When the times required for return trips are taken into account, the vessels will remain at sea for significantly longer periods, which decreases transport efficiency as a whole.
“Shipping costs on the [Asia-to-Europe] route will likely increase by around 15% when allowing for fuel costs net of Suez Canal fees, while there’ll also be additional costs for insurance,” said Chris Rogers at S&P Global.
CMA CGM increased the transport charge for a 40-feet container to $6,600 from the previous $2,000.
Overall, the higher shipping fees and the delays in arrivals will affect 47% of toys, about 40% of household appliances and roughly 40% of apparel being shipped between Asia and Western economies, said Rogers.
Industrial supplies may become harder to come by, according to Rogers. The rerouting will impact shipments of 24% of chemicals, as well as 22% of flat-rolled steels used in the automotive industry and 22% of insulated wires and batteries for automobiles, he added.
There are signs that the delays are already impacting U.S. retail prices.
“These disruptions are adding two or more weeks to transit times for retailers, resulting in increased rates,” said Jon Gold, vice president of supply chain and customs policy for the National Retail Federation said on Thursday.
