News that many shipping companies are suspending journeys through the Red Sea, following a spate of attacks by Houthi rebels on vessels in waters near Yemen, is expected to have negative impacts on Chinese car exports to Europe.
With multiple Chinese and international vessels now re-routing to sail around the southern tip of Africa, the cost of sending cargo to Europe will rise significantly, logistics experts have said.
Vessels leaving Asia will have to travel a further 9,000 kilometres if they have to sail around the Cape of Good Hope, and this could add an additional six to 14 days for cars or other cargo going to Europe, they say.
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Shares of Chinese shipping companies surged on Monday after China Ocean Shipping Group (COSCO) and other shippers said they would steer clear of the Red Sea, amid expectations that would boost freight rates.
Shanghai-based COSCO’s listed unit COSCO Shipping Energy Transportation’s share price shot up by 10%, the exchange-imposed limit, along with shippers such as Fujian Highton Development, Ningbo Ocean Shipping and Shanghai Jinjiang Shipping Group, according to Yicai.
But most appear to have fallen since then on concern that global trade, plus oil and gas cargoes, will be badly disrupted if the crisis persists.
China COSCO Shipping Corp Ltd, which is the fourth largest carrier of containers, suspended journeys through the Red Sea on Monday, while Hong Kong-based Orient Overseas International, Taipei-based Evergreen Marine and Japan’s Ocean Network Express also said they would avoid using the route.
These Asian carriers followed announcements earlier this month by Denmark’s Maersk, Germany’s Hapag-Lloyd, France’s CMA CGM and Switzerland’s MSC.
They follow a series of attacks since mid-November on vessels seeking to journey through the Suez Canal, which normally handles about 12% of global sea trade.
US Defence Secretary Lloyd Austin announced a 10-nation coalition on Monday that aims to deter attacks on vessels by Houthi militants, who have been angered by Israel’s dramatic onslaught on Hamas fighters in the Gaza Strip because of reports that many thousands of civilians have been killed.
However, the Iran-backed Houthis have vowed to continue staging missile and drone attacks on vessels, as well as ship hijacks, until the Israel-Hamas conflict ends.
Indeed, the Houthis attacked two commercial vessels in the southern Red Sea on Monday.
The 192-km (120-mile) Suez Canal is the quickest sea route between Asia and Europe. It is one of seven geographic choke points that are critically important to the world oil trade and are also susceptible to blockages or pirate attacks.
About 9.2 million barrels per day of oil flowed through the canal in the first half of 2023, representing about 9% of global demand, the US Energy Information Administration said, quoting Vortexa data.
- Jim Pollard with Reuters
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