Red Sea Attacks Surpassing Covid Pandemic

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  • The Red Sea crisis and continued Houthi rebel attacks on cargo ships and tankers.
  • The longer transit around the Cape of Good Hope is having a significant impact on vessels .
  • Major companies like Tesla, Volvo, Michelin, Ikea, Next, and Crocs are reporting manufacturing halts.

The ongoing Red Sea crisis, marked by Houthi rebel attacks on cargo ships and tankers, is surpassing the early Covid-19 pandemic in its impact on the shipping industry, according to maritime advisory firm Sea-Intelligence, reports CNBC.

Historical Comparisons

Sea-Intelligence’s data reveals that, excluding the Suez Canal blockage by the “Ever Given” in 2021, the Red Sea crisis has triggered the second-largest drop in vessel capacity in recent years.

Vessel Capacity Dynamics

Unlike the pandemic, where vessel capacity was stretched to its limits, the current crisis benefits from unused vessel capacity that could be reintroduced into service. Approximately 10% of the world’s fleet is currently not in operation.

Potential Solutions

Sea-Intelligence suggests that deploying additional vessels post-Chinese New Year could alleviate the impact, helping restore balance to vessel availability and schedules.

Supply Chain Disruptions

Major companies like Tesla, Volvo, Michelin, Ikea, Next, and Crocs are reporting manufacturing halts and product delays due to container delays caused by the Red Sea crisis.

Global Ramifications

Steve Lamar, CEO of the American Apparel and Footwear Association, emphasizes that threats to Red Sea shipping pose risks to global maritime commerce, leading to mounting delays and cost increases.

Energy Markets and Tanker Operations

The crisis is extending its impact to energy markets and product tanker operators, with Shell and BP suspending shipments through the Red Sea. Energy companies and tanker operators are diversifying routes to avoid the area.

LNG Vessel Diversions

Data from Kpler reveals a growing number of LNG vessel diversions from the Red Sea to the Cape of Good Hope, with significant implications for energy companies and tanker operators in the region.

Product Tanker Rates

Shipping analyst Bendik Folden Nyttingnes notes that longer transit times around the Cape of Good Hope could create a supply shortage of tankers, impacting product tanker rates. Some companies stand to benefit from potential rate increases.

Duration of Crisis

Despite U.S. counterattacks against the Houthis, estimates suggest that the rebel group’s attacks in the Red Sea could persist for six months to a year, posing prolonged challenges to the shipping industry.

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Source: CNBC

 

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