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Additional 1.7 million TEU’s needed due to Red Sea Rerouting

Additional 1.7 million TEU’s needed due to Red Sea Rerouting

Container Shipping Lines could need up to 1.7 million TEU additional capacity to reroute all their services that normally use the Red Sea route via the Suez Canal following the disruption caused by the Houthi attacks, according to analysts.

Rerouting all containership traffic around Africa would soak up 5-6 per cent of global capacity, said Lars Jensen, chief executive of Vespucci Maritime.

However, given the current climate of overcapacity, this is certainly feasible, he explained in a recent report.

Mr Jensen said the boxship segment could require around 1.4 million-1.7 million TEU additional capacity to overcome this challenge, as multiple container line services typically transit the Red Sea including Asia to northern Europe, Asia to Mediterranean, India to Europe and Asia to the US east coast.

“Drought in the Panama Canal means vessels on the Asia to US east coast route cannot use the [Panama] canal and this will result in more significant disruptions for such vessels,” said Mr Jensen.

He also noted how the “real” containership freight rate effect will not be felt until around four weeks’ time.

Containership freight rates on the Asia to the Mediterranean route have already risen by 20 per cent, according to Peter Sand, chief analyst of Xeneta. According to him, rerouting vessels around Africa will likely add US$1 million to a large containership’s fuel costs.

Crucially, as highlighted by Mr Jensen, the latest disruption comes amid a “very different context” than for example during the Ever Given casualty of 2021, with freight rates much lower now. The attacks have also come during the typical low season for the east-west box trades.

Nevertheless, securing safe passage through the Suez will be the utmost priority.

“The worst-case scenario for shipping would be the failure to get a coalition of navies to escort merchant vessels in the Red Sea,” said Mr Jensen.

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