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Unrest in the Middle East spells problems for the Suez Canal route. What should we do with supply chains?
Photo: Suez Canal Authority

Unrest in the Middle East spells problems for the Suez Canal route. What should we do with supply chains?

The conflict in Gaza is escalating, leading to a widening impact. Major global shipowners are suspending cruises through the Red Sea and the Suez Canal due to attacks by Yemeni militants, posing significant consequences for global supply chains.

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Michał Pakulniewicz

Michał Pakulniewicz

19.12.2023

The conflict in Gaza is escalating, leading to a widening impact. Major global shipowners are suspending cruises through the Red Sea and the Suez Canal due to attacks by Yemeni militants, posing significant consequences for global supply chains.

Unrest in the Middle East spells problems for the Suez Canal route. What should we do with supply chains?
Photo: Suez Canal Authority

Maersk has advised all its ships heading for the Suez Canal through the Bab al-Mandab Strait to halt their voyages and await further instructions. This decision follows attacks on Maersk’s Gibraltar and another container ship. The Bab al-Mandab Strait is a crucial gateway from the Indian Ocean to the Red Sea and cannot be avoided when sailing towards the Suez Canal.

Expressing deep concern about the security situation, Maersk stated, “The recent attacks on commercial ships in the region are alarming and pose a threat to shipping safety.”

Hapag Lloyd also suspended cruises after its ship Al Jasrah was hit by an unidentified object, causing a fire on board.

Further aggravating the situation, MSC and CMA CGM, the world’s largest and third-largest shipowners, respectively, have joined Maersk and Hapag Lloyd in suspending cruises. The Liberian-flagged ship MSC Palatium III was attacked by a drone, prompting MSC to redirect some cruises around Africa via the Cape of Good Hope.

The conflict’s root cause lies in the war in the Gaza Strip, affecting global shipping in the waters leading to the Suez Canal. Yemen, embroiled in civil war, has Houthi fighters backed by Iran, who announced attacks on ships sailing to Israel or owned by Israelis in support of Hamas in Gaza.

The United States has called for an international maritime response team to ensure safe navigation in these waters, highlighting the potential consequences for the world economy, particularly in Europe and Asia.

Closing the route through the Red Sea and the Suez Canal, a critical pathway for 12 percent of global trade and up to 30 percent of world container volumes, could lead to significant disruptions. Rerouting ships around Africa would result in longer transit times and higher container rates, reminiscent of the challenges faced in 2021 when the Ever Given blocked the Suez Canal for over a week.

As the situation unfolds, congestion in the Canal and European ports may occur, reducing the supply of container ships globally and driving up rates. The chief analyst at Xeneta analytical company, Peter Sand, warns of a potential 20% increase in container rates, with further rises expected if a solution is not found soon.

Moreover, factors like the approaching Chinese New Year and a 15% increase in fees for using the Suez Canal, announced by the Suez Canal Authority, contribute to the complex landscape that could significantly impact container rates in the near future.

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