CNBC reported this week that AP Moller-Maersk, a major Danish shipping company, is telling its customers to brace for a protracted Red Sea crisis that may last well into the second half of this year.
The study states that the second-largest ocean carrier in the world has increased its schedule by roughly 6% of additional vessel capacity, which has increased operating expenses.
After Houthi rebels imposed a de facto blockade from the Red Sea to the Suez Canal, major shipping corporations began to send hundreds of their boats on longer and more expensive voyages around the Cape of Good Hope in southern Africa. Last month, after the Houthis attacked two of Maersk’s ships, the company ceased operations in the area.
As the US and the UK began hitting sites in Yemen that were connected to the Houthi movement, the militants threatened to increase the scope of their attacks.
Charles van der Steene, regional president of Maersk North America, told CNBC that “Unfortunately, we don’t see any change in the Red Sea happening anytime soon. We’re advising them the longer transit routes could last through Q2 and potentially Q3. Customers will need to make sure they have the longer overall transit time built into their supply chain.”
Roughly 15% of all commercial shipping worldwide goes through the Suez Canal, which is the quickest route from Asia to Europe. The need to redirect ships has resulted in increased expenditures and soaring insurance premiums for major freight corporations.
Shippers, according to van der Steen, must now quantify the cost of their supply chain to the real costs of their supply chain in addition to delivery. It is essentially what they need to make their outcomes work, he added, that many of our customers consider adding a cost-per-unit expense for their supply chain into their budgets. The total cost of their operations may be significantly impacted if that changes and moves fundamentally.
Attacks on merchant vessels in the Red Sea caused a 1.3% decline in global trade between November and December 2023, according to the Kiel Institute’s most recent assessment.
