Red Sea Security and Operational Update

Further to our last update, the security situation in the Red Sea remains turbulent.  

Until now, most headlines have focused on the logistics of rerouting vessels moving westbound from South Asia and the Indian subcontinent to safer but longer voyages that are now transiting the Cape of Good Hope on the southern tip of the African continent. With a few exceptions, this is still the route that continues to be favored by most container ship owners and operators notwithstanding the increased transit times and operational costs.  

Although each individual carrier continues to make their own decision on Red Sea routings or reroutings, the effects of those decisions are borne by the vessel operator and alliance partner carriers. These extraordinary costs are now being passed on to the forwarding intermediaries and the beneficial cargo owners. 
 
Carriers are now implementing several increases, surcharges and extraordinary surcharges related but not limited to Red Sea diversions. The trickledown effect on carrier costs is directly attributable to these diversions (increases in fuel, gearing and insurance, security etc.), but there are also hidden costs to carrier networks that are increasing due to the cascading effects of longer transit times, missed berthing windows, etc.  

Additional feeder costs are also impacting container availability and exacerbating the ongoing imbalances in all major trades. To make up for longer transit times, carriers have started omitting some ports, even blanking many weekly departures. This increase in direct and indirect carrier costs has led to a surge in unforeseen surcharges and general freight rate increases in the last few weeks. 
 
Given the nature of the unforeseen costs and risks to carrier global container routes, we may, at times, be obligated to implement increases and/or surcharges levied by carriers that may apply with little or no notice. 

Although we continue to work proactively with our carrier partners to mitigate these additional charges, we expect the current Red Sea situation to remain fluid and the longer transit times to continue for several weeks until the US-led naval coalition helps secure safe passage and carriers revert to regular routings. 
 
Delmar will continue to closely monitor this evolving situation and share timely information as it becomes available to help our clients make informed financial and relevant business decisions. 

 

For additional information and assistance, please contact your local Delmar Representative.