Red Sea shipping diversions expected to continue for first half of 2024

Container ships are unlikely to resume transits via the Suez Canal for at least the first six months of 2024, as major carriers will only return to the key trade waterway when the risk of attacks on commercial vessels has subsided, according to maritime consultancy Drewry.

Carriers appear to be working on resuming journeys through the Suez Canal within this year, though the duration of the Red Sea shipping crisis is difficult to predict, the London-based consultancy said, citing polls and discussions with its clients.

“The consensus view is that it will be within months, rather than the full-year, and certainly not within weeks,” Simon Heaney, senior manager at Drewry's container research unit, said in a webinar on Tuesday.

Many vessels are avoiding the Red Sea route because of attacks by Houthi rebel groups on merchant shipping, opting instead to sail the longer route around South Africa’s Cape of Good Hope. The number of container ship transits through the Suez Canal in the first three weeks of 2024 is down 74 per cent year-on-year, according to Drewry data. Meanwhile, the Cape of Good Hope transits have jumped 218 per cent during the period.

Spot rates for transporting a 40ft container from Asia to Europethrough the Suez Canal have surged more than 300 per cent since the attacks began in November, according to Drewry. Carriers are implementing surcharges of $500 to $2,500 per container to reroute ships, the consultancy said.

Diverting via the Cape of Good is creating supply chain problems and delays for shippers.

Estimated transit times from Asia to key destinations in Northern Europe are up 32 per cent to 40 days, compared to the shorter transit time via the Suez Canal, according to Drewry.

In the next five weeks, on the Asia to North Europe trade route, there will be 34 cancelled sailings out of 145 scheduled trips, Philip Damas, managing director of the Drewry Group, said.

However, there are already indications that the elevated spot rates from Asia to Europe are softening, Mr Damas added.

If the Suez Canal diversions end by second quarter of this year, then the average east-west shipping rates could decline by more than 10 per cent in 2024 compared to 2023, he said.