Potential Impact of Red Sea Shipping Attacks on Global Trade

 Potential Impact of Red Sea Shipping Attacks on Global Trade

The current disruptions in shipping operations, particularly due to the need to avoid the Suez Canal and restrictions on the Panama Canal, may lead to increased demand for airfreight. Here's a breakdown of the situation and potential impacts:

Suez Canal Situation:

• Shipping companies are rerouting vessels away from the Suez Canal due to attacks on container ships in the Red Sea, off the Yemen coast, by the Houthi Militia.
• Several container carriers have suspended services through the Red Sea and Suez Canal, leading to alternative routes around Africa via the Cape of Good Hope.
• The alternative route will add 10 days to ship voyages, causing delays and potentially increasing rate levels.
• The disruption is expected to impact the sailing schedules of vessels, and shippers may face significant delays.

Panama Canal Situation:

• The Panama Canal is facing restrictions on vessel transits due to reduced water levels caused by drought.
• The number of ships allowed to pass through the canal each day has been reduced, causing delays in the global supply chain.
• While the restrictions were set to become stricter, recent rainfall and higher lake levels have led to a decision to increase the number of daily transits starting in January.

Potential Impact on Airfreight:

• Logistics and forwarding companies predict a milder version of the supply chain crisis seen during the worst of the pandemic.
• Shippers may experience increased rate levels, and ocean freight prices could potentially increase by up to 100%, according to analysts.
• Airfreight demand may rise in the long term due to higher costs and increased transit times for container ships, making airfreight a more attractive and faster option.
• Governments are taking measures to address the Red Sea danger, including the establishment of an international task force to share ships and resources.

Air Cargo Industry Perspective:

• Pierre Van Der Stichele, VP of Global Cargo at Air Partner, suggests that the current disruptions are too late in the year to significantly impact airfreight for the Christmas season.
• While there hasn't been an immediate increase in air charter business, the concerns in Panama are growing for sea container shipping companies.
• The disruptions in ocean freight may lead to a significant increase in the cost of ocean freight, potentially boosting demand for airfreight in the long term.

In summary, the ongoing disruptions in the Suez Canal and Panama Canal may have long-term implications for the shipping industry, potentially leading to increased demand for airfreight as a faster and more reliable alternative.