Nuran Erkul
January 17, 2024•Update: January 17, 2024
LONDON
The container and dry cargo ship traffic through the Red Sea has posted a significant decline as shipping companies are forced to suspend their voyages through this route or divert it to the Cape of Good Hope.
While daily container vessel traffic through the Red Sea halved in Jan. 1-10 compared to the same period last year, total ship traffic decreased 25% with a significant decline in dry cargo ships, according to data compiled by Anadolu from MarineTraffic, a ship tracking and maritime analytics provider.
Houthis in Yemen have targeted commercial ships in the Red Sea in retaliation for Israel's attacks on Gaza.
Last Thursday, the US and UK launched joint strikes on military targets associated with Houthis.
The Red Sea route accounts for nearly 12% of global seaborne trade traffic.
The number of containers in the Red Sea decreased to 118 this Jan. 1-10 from 248 in the same period last year.
Dry cargo ship traffic in the Red Sea decreased by 5% year-on-year in Jan. 1-10. The figure was down 53% on Jan. 10 from the beginning of this year.
While 45 dry cargo ships were sailing in the region in Jan. 1-6, this number decreased to 21 as of Jan. 10.
Tanker transits down
Speaking to Anadolu, Matthew Wright, senior analyst at ship tracking service Kpler, said there are no container ships over 15,000 TEU in the area due to the joint airstrikes on Yemen that the US and UK launched last week.
"On the bulk commodity side, tankers, dry bulk and LNG flows have been less affected, although transits via the Suez Canal are lower since the first diversions in December. Tanker transits are down around 15% for example," he said.
The figure is expected to increase further following the warnings to avoid the area for fear of retaliation, Wright noted, adding: "It's still too early to make many conclusions on the impact on vessel movements. As most container traffic was already avoiding the Red Sea, the impact will be minimal. But, for bulk carriers we expect to see a larger drop than seen over the last three weeks."
Steep hike in spot market freight rates
Simon Heaney, senior manager at Container Research of UK-based maritime research and consulting services provider Drewry, said: "There is only limited scope for more Cape of Good Hope diversions as most container ships that were using Suez have been rerouted."
Pointing to the steep hike in spot market freight rates as an immediate outcome of the attacks, Heaney said Drewry’s World Container Index on Shanghai to Rotterdam subset jumped by 164% from $1,667/40ft container in Dec 21 to $4,406/40ft in Jan. 11.
The figure saw a similar trend for Shanghai to Geno, he added.
"The cost of hiring containerships has also increased, but much less severely so far, as more vessels are required to cover the extra mileage from Cape diversions," Heaney said.
On the impact of the diversion on the world economy, he said the freighter rates are not expected to get near to their levels during the pandemic period.
"The cost implication of the Red Sea attacks on commercial ships depends on the duration of the attacks," Heaney said.
The delays and ship diversions will cause ships to cluster at ports, leading to port congestion and worsening equipment shortages and gaps in sailings, he stressed.
"These effects may significantly impact global supply chains, taking weeks or months to recover. Carriers must adjust schedules, networks, and potentially introduce additional vessels to insure weekly service frequency," he added.
Heaney highlighted that if Suez has to be avoided all year around, the container ship capacity will drop 9% globally.
"In the worst-case scenario, whereby Suez has to be avoided for the entirety of 2024, assuming a 30% increase in trade distance for the roughly 30% of container ship capacity that previously transited Suez, that would reduce effective capacity by some 9% globally."
He noted that this situation is not expected to completely shutter the supply and demand on a global level.
*Writing by Tuba Ongun
