• Security risks in the Red Sea have disrupted shipping routes.
• Shipping companies are implementing increased security measures.
• This increment reflects the base rates raised by ocean carriers.

The escalation of security risks in the Red Sea has disrupted major shipping routes, particularly impacting vessels transiting through the Suez Canal. This disruption has led to delays and increased operational costs, causing a ripple effect on the global supply chain, reports Khaleej Times.

Increased Security Measures for Shipping Companies

In response to heightened security risks, shipping companies are implementing increased security measures. This includes rerouting vessels away from high-risk areas and incurring additional costs to enhance vessel security. These challenges extend to influencing insurance premiums for ships operating in these waters, thereby impacting global trade.

Impact on Global Supply Chain and Trade Routes

The Suez Canal, a crucial waterway connecting Europe to the Indian Ocean and Asia, plays a vital role in global trade. With disruptions, almost 20,000 ships passing through annually are affected, contributing to 10 percent of global trade. The challenges are particularly severe for the oil trade, leading to halted vessels, rerouting around Africa, increased transit times, and higher operational costs.

UAE’s Role as a Logistics Hub Amidst Challenges

Despite disruptions in sea routes and the surge in shipping rates, the UAE has positioned itself as a central hub for shipping. Streamlined customs procedures and efficient cargo flow have made the country resilient. The UAE has adapted to challenges by enhancing multi-modal movements and redirecting shipments originally intended for sea transport to various regional destinations via road transport.

Impact on Shipping Rates and Freight Costs

Shipping rates are experiencing a substantial rise, with a general rate increase (GRI) of $300. This increment reflects the base rates raised by ocean carriers in response to heightened demand for shipping containers. However, confirmation of these rate hikes is pending due to the ongoing Red Sea crisis. War risk surcharges have surged significantly, leading to substantial freight cost escalations for various ports prone to heightened risks.

Uncertain Future Impact

The current impact on the shipping industry is uncertain and may vary based on the nature and intensity of the issues in the Red Sea. Analysts highlight potential impacts not only on shipping costs but also on oil rates, emphasizing the significant role the Red Sea plays in the oil trade.

Did you subscribe to our daily newsletter?

It’s Free! Click here to Subscribe!

Source: Khaleej Times

• 
• 
• 
• 
• 
• 
• 
•