Red Sea Crisis Sparks 80% Surge In Rerouting Costs

• Houthi rebel attacks force ships via Cape of Good Hope, spiking shipping costs by 80%.
• Container Shipping Lines Association’s Vaswani notes increased expenses, impacting customers.
• Rerouting disrupts Suez Canal traffic, adding 10 days to transit, escalating costs.
• Indian Navy deploys destroyers due to security concerns, highlighting route vulnerability and economic risks.

The ongoing attacks by Houthi rebels in the Red Sea have triggered a potential 80% increase in shipping costs as ships reroute to Europe via the Cape of Good Hope. Sunil K Vaswani, Executive Director of the Container Shipping Lines Association, highlighted the use of extra capacities during rerouting, leading to higher expenses. If the situation persists, customers may bear the brunt of these additional costs.

Container Shipping Lines Association Insights

The Red Sea, a crucial maritime route connecting Asia and Europe, is under threat from attacks on commercial ships by Houthi rebels. Recent assaults have compelled vessels to redirect their services from the Red Sea and Suez Canal to the Cape of Good Hope, elongating transit time by approximately 10 days and incurring added costs, including heightened insurance expenses.

Red Sea and Suez Canal Disruptions

Vaswani explained the impact on specific routes, stating, “If you are operating a service between India and Europe, the round trip takes about 56 days for 8 ships if you are taking the shortest route via the Suez. But if you are going over the Cape of Good Hope and adding another 10 days, then you need to put in one additional ship.”

Extended Transit Times and Additional Expenses

Heightened concerns among traders, especially regarding attacks on ships carrying crude oil in the Arabian Sea, have prompted the Indian Navy to deploy guided missile destroyers to maintain a deterrent presence. These incidents underscore the vulnerability of critical maritime routes and the potential economic consequences if the situation escalates further.

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Source: CNBCTV18

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