The Cape of Good Hope has witnessed an unprecedented surge in ship diversions, surpassing the disruption caused by the Ever Given blockage in the Suez Canal.
As of December 24, a record-breaking 125 ships have opted for the route around the Cape, marking a substantial increase compared to the 20 vessels rerouted during the Ever Given incident in March 2021, according to Linerlytica’s report.
This signifies a staggering 525 percent surge in the number of ships opting for the Cape of Good Hope route amid heightened concerns and navigational considerations following recent Houthi attacks.
The three-week delay, a consequence of the diversions, is anticipated to create a bottleneck, particularly for vessels that were originally scheduled to journey back from Europe and the US East Coast to Asia via the Suez Canal.
With the current tally of diverted ships amounting to 1.77 million TEU, pundits have issued a warning about an impending capacity constraint as this extended delay poses a looming threat of a capacity crisis in maritime logistics.
In the latest developments, rates from Asia to North Europe experienced a substantial week-on-week surge, registering an impressive 46 percent increase to reach $1,497/TEU.
Concurrently, rates on the Asia-Mediterranean route saw a notable uptick of nearly 31 percent, reaching $2,054/TEU.
This surge in prices is attributed to the implementation of peak season surcharges and heightened freight-all-kinds (FAK) rates by liner operators.
According to Linerlytica, there is an anticipation that the Asia-North Europe rates will surpass the $2,000/TEU mark this week, with ongoing rate hikes expected.
Carriers are capitalising on the anticipated space shortage in January, driving these increases in container shipping rates.
This shift from Suez Canal is expected to result in delays in delivery and prolonged voyage times that will increase costs for goods, which relies mainly on imports to meet the demand of most of their goods.
The Red Sea, a critical route for oil and fuel shipments globally, is witnessing an uptick in Houthi attacks, employing drones and rockets against foreign-owned vessels.
The Bab al-Mandab strait, situated between Yemen and Djibouti/Eritrea, serves as a crucial passage for many shipping lines traveling from the south to reach the Suez Canal. The alternative routes, such as navigating around southern Africa through the Cape of Good Hope, are significantly longer, impacting both time and resources.
With at least 10 percent of global trade passing through the Bab al-Mandab strait annually, the suspension of operations in the area by these major shipping companies is poised to have widespread implications on international trade routes.