 "Red Sea crisis is increasing the distance and time of global sea transport")
Global sea transport is set for its most substantial annual increase since 2010, driven by attacks in the Red Sea that have forced vessels to take longer routes, Bloomberg reported. According to market intelligence company Clarksons Research, shipping activity, measured in ton-miles, is anticipated to experience its second-largest annual rise on record. This surge is attributed to escalating geopolitical tensions in the Middle East and Europe.
Ton-miles, which calculate the volume of cargo transported multiplied by the distance travelled, are projected to grow by 5.1 per cent compared to 2023, reaching 3.2 trillion ton-miles. Ships are re-routing thousands of miles around Africa’s Horn to avoid the Red Sea and Gulf of Aden, where attacks by Yemen’s Houthi rebels have escalated, including a recent incident where a vessel was sunk by a sea drone.
These longer routes are detrimental to global efforts to reduce carbon emissions.
The disruption has hit container shipping hardest, with around 690 ships now navigating around the Cape of Good Hope. This has caused average seaborne trade hauls to increase by 2.8 per cent this year, compared to 1.8 per cent last year.
Increasing time for cargo ships due to Red Sea crisis
A World Bank report highlights that recent Middle Eastern conflicts have significantly affected maritime traffic, halving the volume through the Suez Canal and Bab El-Mandeb Strait by the end of March 2024, while traffic via the Cape of Good Hope has doubled. Travel distances and times for Red Sea vessels surged in March 2024, with distances travelled increasing nearly 60 per cent from January and travel times similarly extended as ships avoid conflict zones.
Red Sea ports and their economies have been hit hard, with ports like Rabigh and Jeddah seeing import volumes drop by over 3,00,000 metric tonnes and 2,90,000 metric tonnes respectively, nearly a 50 per cent decline in total trade volumes, according to the World Bank.
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Rising cost of freight transport
A JP Morgan report indicates that ocean spot rates have soared due to the crisis. In late January, spot rates from China to the US West Coast and East Coast spiked by 140 per cent and 120 per cent respectively compared to November 2023. The Drewry World Container Index rose by 2 per cent to $4,801 per 40 ft container in May, a 202 per cent increase from the previous year.
The crisis has broad implications, not only for the shipping industry but also for the environment and global economy. Longer routes have increased travel distances for cargo and tankers by up to 53 per cent, raising CO2 emissions due to additional fuel consumption. Economically, soaring freight rates and shipping insurance costs are contributing to inflation and adversely affecting regional and international shipping economies.
Danish shipping giant Maersk reports that the Red Sea situation is causing widespread industry disruptions. Diversions and higher sailing speeds have led to burning an additional 13.6 million tonnes of fuel since mid-December, equating to the emissions of nine million cars. Maersk has leased 125,000 additional containers to meet capacity needs amidst the crisis.
What is the Red Sea crisis?
Since November, Houthi militias in Yemen have repeatedly attacked cargo ships in the Red Sea, making the vital marine route connecting Asia with Europe through the Suez Canal unsafe. Consequently, freighters are now taking the longer route around Africa’s southern tip, increasing shipment costs and delivery times, further straining global trade already impacted by the pandemic, the Russia-Ukraine war, and a global economic slowdown.
The Red Sea, a critical passage for 30 per cent of the world’s container traffic, is undergoing an unprecedented shipping crisis. By the end of March 2024, maritime activity through the Suez Canal and Bab El-Mandeb Strait had decreased by 50 per cent, while navigation via the Cape of Good Hope had doubled.