- Freight hike looms for Nigeria, others on affected trade routes
By Victoria Adonye Ibiama
Amid escalating tensions in the Middle East, shipping companies have rerouted 121 African-bound vessels and diverted approximately $80 billion worth of cargo away from the Red Sea due to the looming threat of attacks from Houthi militants in Yemen.
Since the commencement of the Israel-Hamas war in October, strikes in the Red Sea have prompted carriers to reroute vessels, impacting global trade routes even as logistics experts predict an increase in freight charges by shipping companies.
According to information from Kuehne+Nagel, 121 container vessels have opted to navigate the longer route around Africa instead of the traditional passage through the Red Sea and the Suez Canal.
Paolo Montrone, Senior Vice President and Global Head of Trade Sea Logistics at Kuehne+Nagel, anticipates that more vessels will follow suit.
The cumulative container capacity of these diverted vessels amounts to a substantial 700,000 twenty-foot equivalent units (TEUs), while the evolving situation has triggered concerns about potential disruptions and congestion at ports.
Following these developments, Maersk Line said a standard 20-foot container travelling from China to Northern Europe now faced total extra charges of $700, consisting of a $200 TDS and $500 PSS.
“Containers bound for the east coast of North America will be charged $500 each, consisting of the $200 tax deducted at source (TDS) payment and a $300 Peak Season Surcharge (PSS),” the company added.
Although the cost on African shippers haven’t been announced, Maersk also said routes in other parts of its network would be affected by the Suez disruption, triggering emergency contingency surcharges on a wide range of journeys.
CMA CGM, meanwhile, announced surcharges late on Thursday including an extra $325 per 20-foot container on the North Europe to Asia route and $500 per 20-foot container for Asia to the Mediterranean.
Antonella Teodoro, Senior Consultant for MDS Transmodal, suggests that ocean carriers may deploy additional vessels to address the growing fleet capacity, which has increased by more than 20 percent in the last 12 months. However, she also cautions that adjustments to shipping networks, alongside diversions, will take time and may come at an additional cost.
In light of these developments, the Panama Canal, situated in Central America, is grappling with low water levels, adding to the complexities of global shipping. Port authorities are bracing for congestion due to revised arrival times and planning requirements, particularly in Asia where the repositioning of empty containers is expected to take longer.
CEO Vincent Clerc of Maersk, one of the carriers that temporarily suspended operations in the Red Sea, acknowledges the potential for delays ranging from two to four weeks. Europe, being more dependent on the Suez Canal, is expected to experience more pronounced delays.
For U.S. shippers, alternative routes are available, either through the West Coast ports or via the Panama Canal to Gulf and East Coast ports. The Panama Canal, facing its own challenges with low water levels, has led some shippers to book vessels using the Suez Canal as an alternative route to the East Coast.
Shippers are bracing for delays of approximately 10-14 days for East Coast cargo, with the possibility of further delays at ports if multiple ships arrive simultaneously outside their designated berthing windows. A diversion around the Cape of Good Hope at Africa’s southernmost point adds roughly 3,400 nautical miles, translating to an additional 14 days, depending on the vessel’s speed.
As concerns about disruptions to global trade grow, major container shipping lines, including Maersk, CMA CGM, and Hapag-Lloyd, have announced extra charges to cover the longer voyages around Africa compared to the usual routes through the Suez Canal.
These surcharges come in response to the re-routing of ships following attacks on vessels in the Red Sea by Yemen’s Houthi militant group.
Maersk, CMA CGM, and Hapag-Lloyd are among the leading shipping lines that have temporarily suspended vessel passages through the Red Sea, opting instead to direct ships around the Cape of Good Hope, adding approximately 10 days to the journey. The imposed surcharges are intended to offset the increased costs.