Red Sea Crisis: Global Impact, Challenges and Changes in Logistics

Tensions in the Red Sea force 18 shipping lines to change routes to the Cape of Good Hope, avoiding attacks by Houthi rebels in Yemen. This diversion adds up to 14 days to transit time and generates significant operational costs.

The vulnerability of global supply chains is exposed, as rebels threaten both merchant ships and naval defences. Despite international pressure, led by the US and the UK, the situation persists, undoubtedly affecting maritime trade.

Below we discuss the global impact and the main challenges and changes facing the logistics sector as a result of this crisis:

  • Changes in Trade Routes: there are already 18 shipping lines diverting ships via the African route. Insurance premiums have risen sharply, making it more profitable to sail around Africa than to risk being hijacked or bombed.
  • Rising costs: Diversion around the African continent has increased freight rates by up to 300%. Right now, shipping a container from Spain to China costs three times as much as it did at the beginning of last November.
  • Global impact and challenging forecasts: Delays and vessel backlogs are affecting shipping lines’ supply, raising concerns about availability in Asia-Europe and Transpacific traffic.  And all this with the Chinese New Year just around the corner.
  • Logistical challenges: Although product shortages are ruled out, companies are already experiencing delivery delays. The punctuality of ships has decreased, creating concerns in the logistics chain.
  • Economic repercussions and logistical changes: Shipping lines pass on costs and risks to customers, anticipating significant surcharges. The change of route, however, will increase activity in Spanish ports which now become the gateway to the Mediterranean Sea acting as transhipment terminals.

The Red Sea crisis raises questions about the resilience of supply chains and the capacity of international trade to adapt in turbulent times.

We at XGL are closely following the situation in the Red Sea and strive, as far as possible, to meet our customers’ expectations for their cargo shipments.