You’ve probably heard by now about the Houthi rebels from Yemen. They are reminding us to the time in 2018 when a couple of very large tankers were hit. They were the Ghawar and Arsan tankers operated by the Saudi’s Bahri, in retaliation for supporting the government of Yemen.
The Houthi rebels initially stated that they would target Israeli ships, but others have been hit as they entered the Red Sea. Unfortunately, it’s happening again and that is affecting the ships that need to pass through the Red Sea. It’s just not safe now.
The British Maritime Trade Center (UKMTO) posted another incident on 01 Feb 2024 at 1005 UTC. https://www.ukmto.org/indian-ocean/recent-incidents# The incident was 57 NM West of Al Hudaydah, Yemen, approximately 150 miles into the Red Sea after passing around the bend at the Bab al-Mandad Strait.
The Red Sea is a very strategic passageway because connects the Mediterranean Sea to the Indian Ocean. Ships sail this short cut through the Gulf of Aden by Somalia and Yemen and eventually through Red Sea on the way towards the Suez Canal in Egypt.
The Gulf of Aden is bordered mainly by Yemen and Somalia and a part of Djibouti at its final turning point on the curve into the Red Sea. Vessels coming from the Indian Ocean into the Red sea must first transit in-between both Somalia and Yemen. As the vessel approaches the pinch point, the Bab al-Mandad Strait, by the border of Djibouti and Eritrea it narrows to just under 10 miles.
After passing that pinch point a vessel is now sailing by Eritrea and Egypt on one side and Yemen and Saudi Arabia on the other. Here’s where most of the missiles and rockets aimed at the commercial ships have been occurring. The US has been showing its presence in the Red Sea with its Operation Prosperity Guardian along with over 20 nations cooperating. We hope this will reduce the targeting of commercial vessels.
The shortcut passage through the Red Sea is being avoided due to the danger factor. As a result, vessels now take the longer route around the southern tip of Africa by the Cape of Good Hope. This adds approximately 3,500 extra nautical miles, and depending on how fast the ship goes from 6 to 10 days added to the journey.
Some voyages will add weeks to the trip and lots of extra costs in order to make the necessary changes. The other item is the extra fuel burned. These delays will affect us in numerous ways such as not only by the time for ships to get rerouted, backtrack, turnaround, and alter course but also rescheduling at the ports becomes a bottle neck. We will likely see a backed up port issue when all these delayed ships finally arrive.
In retrospect, we can partially compare this to the pandemic when the demand was high for container goods during 2021- 2022 combined with issues with port congestion. However, the prices will rise as ships get diverted. Not all the containerized goods will be affected in the same manner, as it depends on the values of the goods. Higher valued items in relation to their volume are usually less affected in price hikes. Let’s see!
The last issue is the Panama Canal drought. As ships get diverted, they may need to go through the Panama Canal. At present, the rain has been scarce and the Canal is not functioning at full capacity. These Canal problems are impacting global trade and are far greater than what people think. Disruptions like these could lead to even more product delays as we approach the summer shopping season. Some companies are using the tactic of “ShrinkFlation” as a means to offset losses. $hrinkFlation is simply putting less product into the package and keeping the price the $ame.
When transporting containers on ships, one must account for these 2 major Canal issues. The Red Sea, combined with the Suez Canal and the Panama Canal Drought will certainly cause some shippers to use AIR FREIGHT in the meantime – or at least send some of the cargo by AIR until they rest of the product arrives by boat!
So, plan your shipments and don’t let the Red Sea Seize Your Carpe Diem. Trade within both the Suez and Panama Canals are both feeling the pressure, so get help while there is time. Contact DGL Logistics for help – they’ll fly it out for you.
Happy New Year and Get ready for Chinese New Year. The Year of the Dragon !