Following the bombing by the coalition forces on targets in Yemen to neutralise the threat to shipping in the Red Sea, Gulf of Aden and Gulf of Oman, the Red Sea crisis has further escalated and the risk to merchant shipping is higher than ever. According to Xeneta, the cost of moving goods via the Cape of Good Hope, skipping the Suez Canal is $1000 per box.
According to Xeneta chief analyst Peter Sand, shipping lines will not return to the Red Sea until they are completely convinced that it is safe to transit. This means if the crisis continues for more than six months further, then shipping lines are likely to add more ships to their new network loops to meet the new trade dynamics.
With rates edging up to around US$5,300-5,500/TEU this week, Sand believes that the disruption to supply chains will have a disproportionate effect on smaller shippers who are less able to rapidly react to the chaotic nature of the Far East to Europe trades, than the more resourced shippers and forwarders. In a ‘back of the envelope’ calculation of the extra verifiable costs of transiting the Cape, Sand said that while there would be savings in insurance and Suez Canal costs of around US$1.5 million a ship, the extra fuel for the longer journey, 20 days on a round trip, will add US$1.2 million. With charter rates at US$60,000/day that would add a further US$1.2 million and other expenses will see verifiable costs increase to US$2.5 million per ship, per round trip, translating to around US$1,000/container, Sand said.
