WHAT’S THE LATEST

In light of the ongoing threat to vessels transiting in the Suez Canal and the severe drought conditions in the Panama Canal, carriers have resorted to rerouting via the Cape of Good Hope, adding significant transit times and costs. Given the current scenario, we anticipate that the disruption caused by rerouting will continue through January 2024. 

 

A DEEPER LOOK

As of December 24, 2023, a record high of 125 container vessels were sailing around Africa instead of using the Suez Canal, with a total container capacity of 1.77 million TEUs. This number is expected to increase as more vessels are being planned to reroute.

  • To address the security concerns in the Red Sea, the international joint task force has launched Operation Prosperity Guardian, which provides security escorts for vessels passing through. Despite these efforts, most of the major container carriers have already diverted a significant portion of their capacity around the Cape of Good Hope. While some vessels have returned to the Suez Canal route under protection (as listed in Vessel Contingency Updates of Maersk), the impact of the situation remains to be seen.
  • Greater impact expected for European shipments: Europe is more reliant on the Suez Canal than other regions, and therefore may experience more significant delays. Analysts at UBS have estimated that the Cape of Good Hope route reduces the effective capacity of an Asia-Europe trip by 25%. Diversions and adjustments to shipping routes require time and effort and are not without costs.

Port authorities are anticipating congestion at ports due to updated arrival times and planning needs, which may cause some disruption. In fact, advance bookings are 3.5-4 weeks out.

In addition, pausing or elongating transit times strains global shipping capacity, not just in the Red Sea, which has resulted in carriers imposing rate increases and very large amounts of surcharges by means of PSS or GRIs across the board. These increases are additionally fueled by the pre-Chinese New Year rush.

 

CAPACITY AND RATES

Our ocean experts are monitoring the rates and capacity very closely. Please see the following key figures on the key trade routes:

 

TRANSPACIFIC EASTBOUND LANE

Travelling via southern Africa will add about 7 days to a journey from Asia to US East Coast.

As of December 28, 

  • 26 vessels from Asia to US East Coast have been diverted to the Cape of Good Hope.
  • 75 vessels from Asia to US East Coast are expected to be diverted.

 

ASIA-EUROPE LANE

Travelling via southern Africa will add about 10 days to a journey from Asia to North Europe and the East Mediterranean.

As of December 28, 

  • 62 vessels from Asia to Europe have been diverted to the Cape of Good Hope.
  • 183 vessels from Asia to Europe are expected to be diverted.

According to Freightos, the Red Sea crisis has already resulted in a 44% of the increase in China-Mediterranean rates. 

 

THE BOTTOM LINE

The situation in the Red Sea remains precarious, and the effects of global warming on the lowering of water levels in the Panama Canal will be long-lasting. Carriers will continue to reassess the situation regularly before reinstating their services. Until then, the industry will have to contend with higher costs, longer transit times, and environmental concerns.

 

WHAT’S NEXT

We are continuing to monitor the situation closely and provide timely updates to those impacted. At this time, your SEKO team continues to work to:

  • Make arrangements for additional SPOT/Premium space on a First Come, First Serve basis
  • Secure accurate forecasts with existing clients (including container type and counts) to plan for February and March demands as soon as possible

We are your logistics partner, ready and able to pivot quickly in the face of logistics challenges, whether climatic (as we’re seeing in the Panama Canal) or man-made (as we’re seeing now in the Red Sea). Should diversions persist or expand, our team is prepared to help find alternative routes, where necessary and create a solution that works for your business and your customers.

If you have questions, please reach out to your SEKO representative, or email us at hello@sekologistics.com.