Shippers divert $35 billion in cargo from Red Sea

$35 billion in cargo diverted away from Red Sea amid attack fears

So far, shippers have diverted about more than $30 billion worth of cargo away from the Red Sea as they face the threat of attacks from Houthi militants in Yemen.

Carriers are re-routing vessels as a direct result of 15 strikes in the Middle Eastern body of water since the start of the Israel-Hamas war in October. U.S. Defense Secretary Lloyd Austin announced the formation of an international task force to address security issues.

Details of the U.S.-led operation are yet to be confirmed. Dan Mueller lead analyst for the Middle Eastern Region for maritime security firm Ambrey said they continue to advise clients to continue with their Best Management Practices by thoroughly checking their vessel fleet’s current and past affiliations, the vessel’s Transit Risk Assessment, preparating the crew for emergencies and other safety measures.

At the moment, there are 57 container vessels sailing the long way around Africa instead of cutting through the Red Sea and the Suez Canal, according to Paolo Montrone, senior vice president and global head of trade sea logistics at Kuehne+Nagel.

“That number will increase as more will take this routing,” Montrone told CNBC. “The total container capacity of these vessels is 700,000 twenty-foot equivalent units (TEUs.)” Containers come in both 20-foot and 40-foot units.

The approximate value of those containers is $50,000, according to Antonella Teodoro, senior consultant for MDS Transmodal. That adds up to $35 billion in total cargo being diverted.

Ocean carriers and companies are in a race to explain to U.S. shippers the delays they could be facing as a result of the Houthi threat. The Houthis, a militant group backed by Iran, have expressed solidarity with Palestinian extremist organization Hamas in its war against Israel. Earlier Tuesday, U.S. Defense Secretary Lloyd Austin announced the formation of an international task force to address the security issues.

Carriers could deploy additional vessels since fleet capacity has grown by more than 20% in the last 12 months, according to Teodoro.

“Demand is expected to remain flat so there is capacity available to keep ocean carrier lines on time and pick up the containers once bound on these diverted vessels,” Teodoro told CNBC.

“Ocean carriers could also start making adjustments to their networks in addition to the diversions,” said Teodoro.”But, diversions/adjustments will require time and won’t come free, understandable. One can hope we won’t see the high rates seen in the recent past.”

Teodoro stressed the disruptions at both the Suez and Panama canals highlight the importance of an international authority monitoring how capacity is offered and at what price if we want a more resilient global supply chain. The Panama Canal, located in Central America, has struggled with low water levels for months.

Port authorities are expecting congestion as a result of updated arrival times and planning needs, according to Montrone.

“The situation is very volatile and the reconfiguration…

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