On Monday, May 6, Maersk, the Danish shipping giant, stated that the disruption in Red Sea container shipping is worsening, with an expected reduction of up to 20% in capacity between Asia and Europe in the second quarter.
Since December of last year, Maersk and other shipping companies have been rerouting their cargo ships around the Cape of Good Hope in Africa to avoid attacks by Iran-backed Houthi militants in the Red Sea. However, this longer route has increased shipping time and costs.
According to Reuters, Maersk remarked, “The risk areas have expanded, and attacks are spreading to more distant waters.”
In their latest advisory to customers, the company added, “This has forced our vessels to travel even further, resulting in temporary increases in time and cost to deliver goods to their destinations.”
A spokesperson for Maersk stated that fuel costs for the affected routes between Asia and Europe have increased by 40% per trip.
Maersk estimates that by diverting capacity away from the Suez Canal, container industry capacity between Asia and Northern Europe and the Mediterranean will decrease by 15% to 20% in the second quarter.
The shipping giant’s spokesperson noted that these disruptions have ripple effects on several other container cargo routes, especially those from Asia to the East and West coasts of South America. The spokesperson also emphasized that the situation in the Red Sea is complex and evolving.
As for when the current situation might change, Maersk, seen as a barometer of global trade, predicted last week that the disruptions are likely to persist at least until the end of 2024.
German shipping company Hapag-Lloyd also believes the crisis can be overcome by the end of 2024 and is currently re-adjusting its vessel routes.
Hapag-Lloyd commented in an email, “The attacks in the Red Sea and the Gulf of Aden are spreading further and further out to sea. That’s why we completely avoid this region.”
Meanwhile, Rodolphe Saade, the CEO and Chairman of the French shipping group CMA CGM, told World News that the company is still sending some ships through the Red Sea under the escort of French or other European naval vessels, but most vessels are being redirected around Africa.
Saade stated in the interview on Monday, “The issue is that you have to berth in ports that are not the final destinations, and then transfer (the cargo) onto smaller ships.”
“Tangier Port in Morocco has reached its full capacity, so alternative solutions need to be found, such as Algeciras Port in Spain or Valencia Port,” he added.
The ripple effects of sailing around Africa include bottlenecks, ship congestion (multiple vessels arriving at ports simultaneously), as well as equipment and capacity shortages.
Maersk mentioned, “We are making every effort to enhance reliability, including speeding up sailing and increasing capacity.” The company further stated that they have leased an additional 125,000 containers so far.