East Africa Faces High Costs and Delays of Goods Due to Red Sea Tensions
Major global shipping companies are redirecting their vessels away from the Red Sea in response to an escalating threat of attacks by Houthi Rebels.
This shift 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 Mediterranean Shipping Company (MSC), the world’s largest shipping group, has announced its intention to reroute vessels away from the Red Sea due to the heightened risk of attacks.
The surge in security risks is anticipated to drive up insurance costs, subsequently impacting consumers who may bear the brunt of elevated expenses. Additionally, the extended journey durations will incur higher fuel consumption, adding to overall operational costs.
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.
MSC reported a “serious” situation, citing an attack on one of its container ships, MSC PALATIUM III, in the Red Sea on Friday.
Maersk, the world’s second-largest shipping firm, has expressed alarm over the situation. Following a near-miss incident involving Maersk Gibraltar and another attack on a container vessel, the company has instructed all its vessels in the area bound for the Bab al-Mandab Strait to halt their journey until further notice.
CMA CGM, the world’s third-largest shipping company, has similarly directed its container ships in the region to reach safe areas and suspend their journeys in secure waters immediately and until further notice.
These decisions by the four leading shipping companies, which collectively represent four of the top five in the world, are expected to result in substantial costs not only to consumers but also the shipping lines themselves.
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.