Houthi attacks upend trade as ships are forced long way around Africa
Most of the massive ships that carry some 12 percent of all world trade through the Suez Canal have turned course, set to travel the long way around southern Africa instead.
Attacks on passing ships by Iranian-aligned Houthi militants in Yemen, in response to Israel's war with Hamas in the Gaza Strip, have choked the only southern approach to the planet's most-trafficked shortcut.
As many as 12 out of every 14 container ships, along with a large share of oil and gas tankers, bound for the key route between the Mediterranean and the Red Sea - which shortens the trip between Asian and European waters, and between Asia and swaths of the Atlantic, by thousands of miles - are instead heading south, according to Everstream Analytics, which analyzes supply chains.
The detour could add as much as a month to time underway, delaying the delivery of goods and the docking of ships that are supposed to continue onward, including to the east coast of the United States and from there back to Asia carrying new loads.
The route of the MOL Celebration, a large container ship, tells a story shared by many others. It appears to have changed direction on its approach to the Red Sea, according to MarineTraffic, which provides real-time information on the movement of ships. It turned sharply on Friday, sailing southwest.
It was just southeast of the Horn of Africa on Thursday. Mirko Woitzik, Everstream's global director of intelligence solutions, said in an interview that the Houston-bound ship was nearly certain to have been heading for the Suez Canal. The Japanese firm that manages the ship, ONE, is among those that have rerouted vessels because of the Houthi attacks. ONE, along with the ship's technical manager and owner, did not respond to requests for comment.
The world's top 10 container shipping lines are refusing to make the journey through the Red Sea. In recent weeks, Houthi militants have launched missiles at or hijacked ships at the sea's southern mouth - known as the Bab el-Mandeb, or the Gate of Tears.
The chaos at one of the world's busiest shipping choke points, a reverberation of the Israel-Hamas war, threatens to upend international commerce, already under strain from rising inflation, disruptions caused by the war in Ukraine and the aftershocks of the coronavirus pandemic. A drought has affected traffic in the Panama Canal, another key passage in global trade, further complicating supply chains.
Container shipping capacity through the Suez Canal dropped sharply this week, from an already small 40 percent of its full capacity on Monday to 12.7 percent on Wednesday, according to Woitzik.
Only smaller, niche carriers are continuing to sail the Red Sea, Woitzik said. The Houthis have said they are targeting Israeli-affiliated ships, though shipping giants such as Denmark's Maersk and Taiwan's Evergreen have said they will avoid the area as they fear the attacks may be more indiscriminate.
Israel's Red Sea port in Eilat on Thursday said Houthi attacks had driven down activity there by 85 percent, Reuters reported.
As when a flight is delayed, the effects of rerouting ships, which cannot yet be measured in full, cascade: The crews' hours have been thrown off, deliveries are late, and the next voyage is also delayed.
A month might not sound like a long time for a slow-moving ship, but with the cost to run such a vessel averaging $40,000 to $50,000 per day, "that's a huge increase in cost and time," said Corey Ranslem, chief executive of Dryad Global, a maritime intelligence firm.
It will take weeks, or maybe months, to tell how disastrous the situation is, Woitzik said. Many ships have turned off the signals allowing them to be tracked from afar, in an attempt to throw off would-be Houthi attackers, further obfuscating the extent of the situation, he said.
"The longer this issue goes on, the economic impact will continue to increase," Ranslem said. One immediate effect, he said, is that insurance rates for ships sailing the region have "gone up pretty substantially." Rates for Israeli-linked ships have gone up as much as 250 percent, according to Woitzik, with some insurers refusing altogether to cover them.
A committee of underwriters at Lloyd's, the London-based insurance market, expanded the area in the region that it considers high risk. The change was mostly to "reflect the missile range," Neil Roberts, head of marine and aviation at the Lloyd's Market Association, told Reuters.
The United States has been shooting down Houthi missiles and drones, but that has not stopped the attacks. Washington announced this week the formation of a global military coalition, dubbed Operation Prosperity Guardian, set to send warships to the area to escort tankers and others through the threatening waters. But the band of maritime bodyguards has done little to quell fears from global shipping companies.
The crisis has drawn comparisons to the 2021 grounding of the Ever Given, a Japanese-owned container ship that got stuck in the Suez Canal, preventing ships from passing through. The incident clogged traffic there for nearly a week. While the effects were ultimately not as severe as had been feared, the episode raised concerns and global awareness about the precarious nature of relying so heavily on a narrow channel of water.
The six-day blockage caused by the Ever Given forced a full closure of the Suez Canal, impacting global trade for four to six weeks after, while the Houthi attacks have only partially restricted the flow. But the impact of the attacks could be much more enduring, Woitzik said.
A major flash point could come days after the Lunar New Year - Feb. 10, 2024 - when Chinese factories reopen after the holiday, setting off a major surge in Asian exports, Woitzik said. If the ships are still delayed, even more disarray could ensue.
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Samuel Granados and Cate Brown contributed to this report.
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