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Cargo shippers have shifted approximately $35 billion worth of goods away from the Red Sea route due to concerns over potential attacks




Amid rising security concerns, the maritime industry has witnessed a substantial redirection of cargo valued at approximately $35 billion away from the Red Sea. This strategic shift in logistics, precipitated by over a dozen attacks attributed to Houthi militants since the onset of the conflict between Israel and Hamas in October, has led to significant changes in shipping routes.


The U.S. Defense Secretary, Lloyd Austin, has announced the creation of a multinational task force aimed at tackling these emerging security challenges. In light of these developments, shipping companies and businesses are scrambling to communicate expected delays to American importers.


As a preventive measure, Dan Mueller, a leading analyst at maritime security firm Ambrey, advises shipping companies to diligently assess their vessels for potential risks and prepare their crews for emergency situations.


In response to these security threats, shipping companies are increasingly opting to navigate around Africa, avoiding the Red Sea and the Suez Canal. Paolo Montrone, a senior executive at Kuehne+Nagel, notes that 57 container ships, capable of carrying a combined 700,000 twenty-foot equivalent units (TEUs), are currently taking this alternate route.


The financial implications of these diverted cargos, estimated by Antonella Teodoro of MDS Transmodal to be around $35 billion, are significant. In addition to route diversions, shipping companies are exploring the deployment of additional vessels to mitigate capacity constraints and potential delays.


The disruptions at major global transit points like the Suez and Panama Canals underscore the necessity for robust international oversight of shipping capacities and pricing structures. Port authorities are bracing for congestion due to these changes in shipping schedules.

With the situation in the Red Sea and the Suez Canal rapidly evolving, logistics companies are advising clients to anticipate delays and consider alternative shipping routes. For instance, ITS Logistics and OL-USA are recommending alternative routes and a multi-faceted approach to cargo transportation for their U.S. clients.


The Ocean Shipping Reform Act, passed in June 2022, empowers the Federal Maritime Commission to closely monitor shipping rates and ensure compliance with the Shipping Act, which aims to prevent unreasonable practices by ocean carriers.


Source: MMCG, CNBC

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