In the recent events in the Red Sea by Houthi militants from Yemen, Mike DE Angelis, the Head of International Solutions at Four Kites, in a recent study shows far-reaching consequences through the global shipping industry, leaving an enduring impact on global trade, oil price, and commodities all over the world.

The strategic precision with which these attacks were executed has significantly created obstacles in the flow of trade through the Suez Canal, a vital artery for global shipping. Global shipping giants have decided to halt shipping through the Suez Canal, a vital artery for global shipping. Due to many attacks on shipping vessels across the Red Sea, the shipping company has decided to divert the route around Cape of Hope until further notice.

This rising security concern across the Red Sea has evoked other major carriers, including Ocean Network Express (ONE), Orient Overseas Container Line (OOCL), Wallenius Wilhelmsen, and Yang Ming, to either temporarily suspend Red Sea voyages or opt for alternative routes such as around Africa. A substitute route around Africa has a significant disadvantage because it will add up to 1-2 weeks extra in travel duration, as elucidated by Experts.

The global economic repercussions of these attacks are far-reaching. Goldman Sachs estimates that around 30 per cent of the global container trade has been impacted, with 70-80 percent of vessels rerouted as of December 2023.

Experts underscore the wide-ranging consequences, encompassing surging freight rates, delays in ships returning to Asia for reloading before the Chinese New Year, and escalating oil prices fulled up by supply chain apprehensions.

As the Chinese New Year approaches, coupled with on-going restrictions on the Panama Canal, the situation becomes further entangled. experts note that the shortage in vessel availability may strain capacity during China’s seasonal export surge.

Adding to the complexity, the Panama Canal’s low water levels curtail daily vessel transits, intensifying the uncertainty surrounding the Suez Canal. This may lead to alternative routes for cargo between the US and Asia, such as West Coast ports, or reliance on rail and truck transportation.

The complete impact of the Red Sea crisis remains uncertain, but experts suggest various mitigating measures for businesses and shipping liners. Caution in approaching long-term contracts, securing flexibility or contingency clauses, maintaining transparency, and fostering communication with customers are pivotal strategies to navigate these turbulent times.

Experts also advocate for exploring multi modal transportation options to reduce transit times and increase flexibility, along with collaborative efforts with logistics partners and using predictive analytics for optimal solutions.

Looking ahead to 2024, experts highlight the persistent unpredictability inherent in the shipping industry. The growing frequency of unpredictable weather and evolving geopolitical tensions suggests enduring turbulence within supply chains. Proactive planning, amidst potential threats like labor unrest, extreme weather events, or shifting geopolitical tensions, is essential for the shipping sector to weather additional shocks.