In response to increased attacks by Iranian-backed Houthi militants in the Red Sea, major shipping companies, including MSC, Hapag-Lloyd, and Maersk, have temporarily halted sailings through the Suez Canal. Much of the traffic will now me routed by the Cape of Good Hope.

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New Suez Crisis

This decision comes after the MSC Palatium III was attacked, prompting the shipping giant to redirect some services via the Cape of Good Hope. Other companies like ZIM and Maersk have also rerouted vessels to avoid the Red Sea. As a result, numerous shipping companies, including BP, CMA CGM, Equinor, Euronav, Evergreen, Frontline, Hapag-Lloyd, HMM, Maersk, MSC, OOCL, and Yang Ming Marine Transport, have considered or decided to pause Red Sea transits.

The attacks by Houthi rebels have led to a growing list of companies rerouting ships, impacting global trade routes. The increased diversions around the Cape of Good Hope are driven by ongoing attacks in the Red Sea, particularly near the Bab-el-Mandeb Strait.

The attacks have raised concerns about the safety and security of seafarers and disrupted shipping schedules. The longer voyages around Africa are causing a synthetic reduction in capacity, leading to higher shipping demand and constraining transport capacity.

The situation has prompted a new U.S.-led multinational military effort called Operation Prosperity Guardian to protect commercial shipping from Houthi attacks.

The duration of the detours around the Cape will significantly impact freight rates and shipping stocks, with the focus on whether this will be a brief event or a more sustained trend. Container shipping, crude tankers, and product tankers are among the sectors affected differently by the disruptions, with potential upside for container freight rates and tanker spot rates.

The impact on global supply chains is evident, with potential delays in container cargo arrivals and disruptions in tanker trades. European imports from Asia, Asian imports from Europe, and U.S. imports from Asia are identified as the most exposed markets in container shipping.

Jet fuel and diesel supply routes are particularly at risk due to the diversions. The article highlights the complexity of the situation and the potential consequences for various sectors in the shipping industry, though the use of South Africa’s ports may briefly reduce fuel prices in the local economy.

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Missed opportunity

While the rerouting of vessels away from the Suez Canal has geopolitical implications, local South African ports may not benefit from the increased traffic due to massive congestion issues.

The attacks in the Red Sea have raised concerns about the security of key shipping routes and highlighted the vulnerability of global supply chains to disruptions caused by geopolitical events. The consequences of these developments are reverberating across the shipping industry and could have lasting effects on trade routes and shipping patterns.

The Port of Cape Town has only recently cleared a massive container backlog which reached a seven week waiting period at its peak, and the influx of shipping in our waters is likely to return us to the congestive backlog.

Particularly vulnerable are the agricultural exports, which rely on refrigeration containers to preserve the fresh produce. Refrigeration can only preserve fruit and flowers for so long before the expire, and a return to the sorts of congestion seen in previous months would be a massive blow to the local industry, which is still recovering from a heavy flood season and threatened by race-based export bans.

The DA and local farmers have been attempting to negotiate with the national government for increased influence over the corrupt and failing port infrastructure to protect the vital industry, but have been rebuffed by a national government which considers central control more important than quality governance.