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Red Sea crisis hitting one third of world containership capacity

 

The global container shipping industry faces a critical couple of weeks amidst continuing attacks on merchant vessels in the Red Sea by Yemen-based Houthis and substantial carrier re-routings to avoid the Suez Canal prior to the Chinese New Year period starting on February 10.

Philip Damas, head of Drewry Supply Chain Advisors, says the next 4-5 weeks will be crucial for global shipping and container traffic – especially between Asia and Europe as well as the Mediterranean.

Drewry estimates that more than 800 ships representing about 10 million twenty-foot equivalent units (TEUs), or approximately one-third of the world’s container ship capacity, are impacted by the Red Sea attacks and re-routings around the Cape of Good Hope.

“Any disruption before Chinese New Year is always a concern for shippers. Although the current situation is already causing bottlenecks in global supply chains, we believe that there is sufficient capacity to handle the resulting congestion, equipment shortages, and schedule gaps,” Mr. Damas affirmed.

But he cautioned that Asia to Europe capacity is currently “very limited” and there is even less capacity to the Red Sea from Asia, Europe, or the U.S. “The is something of panic in China right now about the availability of capacity,” he said.

“It should be noted, however, that container equipment is likely to remain displaced for several weeks, which will affect service schedules and create inflationary headwinds. There is limited flexibility to mitigate any escalation in the regional security situation,” Mr. Damas added.

(Photo of vessel in Suez Canal prior to the Red Sea crisis.)

 

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