Troubles in the Red Sea cause an increase in shipping fuel consumption

The Red Sea is a significant waterway connecting the Indian Ocean to the Mediterranean Sea through the Suez Canal. 

1.Sharp Decline in Suez Canal Traffic: Recent data from the International Office’s Portwatch Tool of the Monetary Fund reveals a dramatic decrease in the number of cargo and tanker ships passing through the Suez Canal. 

From around 75 vessels a day last year to about 35 now, this halving is a direct consequence of increased security threats from attacks by Yemen-based Houthi militias starting in November 2023, according to EIA.

2.Adoption of Longer Maritime Routes: To circumvent the high-risk areas of the Red Sea, shipping companies are increasingly navigating via alternative routes, primarily around the Cape of Good Hope. 

This change not only adds thousands of miles to their journeys but also extends transit times by two to three weeks depending on the ship’s origin and destination.

3.Surge in Fuel Consumption: The shift to longer maritime routes has led to a surge in fuel consumption. Singapore, recognized as the world’s largest bunkering port, has experienced record highs in ship fuel sales. 

The Maritime and Port Authority of Singapore reported that bunker fuel sales have continuously increased from December 2023 to the first quarter of 2024, reaching a historical peak in December 2023.

These developments illustrate the significant logistical and economic impacts on global shipping operations due to geopolitical instabilities.

As the industry adjusts to these new routing norms, the increased operational costs from extended travel distances and higher fuel consumption are reshaping the maritime transport landscape.

Key Events and Timeline:

Mid-November 2023: Houthi attacks on commercial ships in the Red Sea began, prompting concerns about the safety of shipping in the region.

January 11, 2024: The US and UK launched airstrikes on Houthi targets in Yemen to counter the attacks on commercial vessels.

January 2024: The US-led Operation Prosperity Guardian and the EU Aspides Mission in the Red Sea were launched to secure the region.

Troubles in the Red Sea cause an increase in shipping fuel consumption
Troubles in the Red Sea cause an increase in shipping fuel consumption

Red Sea Shipping Crisis:

Rerouting of Ships: The attacks have led to a significant shift in global container shipping, with approximately 28% of the world’s container shipping traffic passing through the Red Sea.

This diversion has resulted in higher shipping costs and scheduling disruptions.

Impact on Supply Chains: The rerouting of ships has caused delays in critical deliveries and gaps in supply chains, particularly affecting European manufacturing sectors.

Key Chokepoint:

Bab el-Mandeb Strait: This 32 km wide strait connects the Red Sea to the Gulf of Aden and is a critical maritime chokepoint. 

Alternative Routes:

Cape of Good Hope Route: This route involves navigating around Africa, which is a longer and more expensive route.

It adds approximately six to 15 days to shipping times, depending on the final destination, resulting in an average delay range of 10 to 15 days for European deliveries.

Suez Canal: Although the Suez Canal remains open, it is not a viable alternative for many shipping companies due to the high costs and limited capacity.

 

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