The impact of geopolitical violence on global container flows continued to expand today as maritime carrier ONE network became the sixth out of the ten largest container carriers who will be diverting their ships away from the Red Sea and Suez Canal.
The move shows the widening spread of violence sparked by Israel’s war with Hamas militants in Palestine following a terrorist attack in Israel on October 7. The ensuing military actions have lately included Houthi fighters in Yemen who are firing missiles and drones at commercial vessels in the Red Sea heading to and from the Suez Canal.
Rather than risk those impacts, many container lines are taking longer, more expensive routes to reach their destinations, such as sailing south around the horn of Africa. While safer, those routes require more time and fuel, adding between seven and 14 days of transit time to round the Cape of Good Hope and inflating carriers’ costs by 15 to 20%, according to data from Freightos, a freight booking and payment platform.
Those conditions have already created an increase in freight rates such as a 14% rise in Asia - N. Europe prices in the last few days. And since ONE has added its name to the list of container lines following that approach, the strategy now affects 62% of global capacity and 19% of global volumes, Freightos said.
Fortunately for global trade patterns, the disruption comes at a time period when December and early January typically have slower freight demand than other months. And compared to the previous Suez Canal blockage—when the Evergreen EverGiven got wedged sideways in the waterway for more than a week in 2021—port congestion levels are currently low enough to handle the impact, Freightos said.
In addition, the U.S. is now leading a 10-nation naval task force intended to counter the threat and shorten the disruption. Known as “Operation Prosperity Guardian,” that military deployment should allay any fears by U.S. consumers about late deliveries of Christmas gifts ordered during the winter peak season, according to the Retail Industry Leaders Association (RILA).
“Shoppers who still have gifts to buy on their holiday lists don’t need to panic by headlines coming out of Suez Canal. Inventory for the holidays has been on U.S. soil for months and products will be on shelves for last minute buyers. The escalating security situation in the Suez Canal is being monitored closely by leading retailers, and we appreciate the Biden administration’s swift response in announcing Operation Prosperity Guardian, a multinational response to recent attacks on vessels in the Red Sea,” RILA vice president Jess Dankert said in a release.
While rerouting ships away from the Suez Canal results in uncertainty and disruption for retailers and other shippers, it will not impact holiday inventory, RILA said. However, that balance could shift if the disruption continues over a longer period of time.
“It could disrupt supply chains next year depending upon how long shippers lack safe access to the Suez Canal. Retailers are paying close attention to the situation and flexing their highly developed response capabilities to mitigate any disruptions and extra time that will need to be added to shipping schedules due to this developing situation,” Dankert said.
