News #97 - Shipping lines unlikely bongdaso v make a quick return bongdaso v Suez Canal

There is unlikely bongdaso v be a quick shift from airfreight bongdaso v ocean following the Israel-Hamas ceasefire that could also bring bongdaso v an end a prolonged period of conflict on the Red Sea.

The conflict that began in the last quarter of 2023 forced shipping lines bongdaso v reroute away from the Suez Canal and prompted additional interest in airfreight due bongdaso v increased transit times and costs for ocean shipping.

Houthi rebels have now announced they will halt attacks on all non-Israeli vessels in the Red Sea.

But airfreight shippers need not worry about an immediate drop away in business as any return bongdaso v the Red Sea and the Suez Canal will not be simple or quick because of safety considerations, said Xeneta's chief analyst Peter Sand.

It also depends on whether companies are prepared bongdaso v transition from current routes, while there will also be congestion and supply chain delays when shippers do return, suggested the analyst.

Shippers will understandably be cautious about any return bongdaso v the Suez Canal, not least because Israeli ships are excluded from the ceasefire deal.

Sand stressed that “an immediate large scale return is highly unlikely”, firstly because there is still much bongdaso v be done before safe passage is assured and established and secondly because establishing viable alternative passage took much effort and shippers may be reluctant bongdaso v switch back.

“Diversions around the Cape of Good Hope are not what the industry wants, but the situation is stable and being managed,” he said in a blog post on 20 January. “It took many months and extreme disruption bongdaso v achieve this stability so carriers will be wary of heading back bongdaso v the Red Sea too soon. If it goes wrong, they’re back bongdaso v square one.”

There will be a chaotic period when ships do begin bongdaso v return bongdaso v the Red Sea.

“There will be severe disruption in the immediate period following a return of ships bongdaso v the Red Sea," said Sand.

He added: “Ships will not be where they are supposed bongdaso v be and will arrive at ports much earlier (or later) than scheduled. If large numbers of ships arrive at ports at the same time, it will cause massive delays and congestion that ripple across ocean supply chains.”

The transition period will likely see some ships continue bongdaso v sail around the Cape of Good Hope, while others travel through the Red Sea. Carriers will likely approach a transition in a phased way by gradually increasing the size of vessels, predicts Xeneta.

“The complexity of ocean container shipping networks means it could take 1-2 months for schedules bongdaso v transition bongdaso v ‘normal’ operating conditions through the Red Sea,” said Sand.

That said, if capacity increases and rates decrease then a strong case for shippers bongdaso v move from air bongdaso v sea may emerge.

Risks will certainly persist for shipping in the Red Sea and Suez Canal, agreed Scan Global Logistics, with the situation for Israeli ships, and therefore any ships travelling nearby, remaining volatile.

“Vessels fully owned by Israeli companies or sailing under Israeli flags will still be subject bongdaso v Houthi sanctions and, thereby, risk of attacks until all phases of the ceasefire have been implemented,” noted the company in a market update on 20 January.

The company further stated that It is too early bongdaso v speculate on how the leading carriers will act.

Carriers, including Maersk and Hapag Lloyd according bongdaso v Scan Global, are looking for certainty of safety before they consider shifting their operations back bongdaso v the Suez Canal.

Safety is paramount for shippers, added Simon Heaney, senior manager, container research at Drewry. He pointed out that over 100 vessels have been attacked since November 2023 and “we should not expect bongdaso v see container lines rush bongdaso v return bongdaso v the Suez Canal”.

Shipping companies will not want bongdaso v compromise safety, plus major carriers are about bongdaso v start phasing in new East-West networks as part of a big change in alliance structures so they will not want bongdaso v risk changes that may disrupt operations.

“In Drewry’s view most carriers will wait bongdaso v see how things develop and will need bongdaso v be utterly convinced that the threat of attack has been eliminated before they consider a return bongdaso v trans Suez transits. This timeline would take months rather than weeks,” said Heaney.

With attacks in the near past and many issues bongdaso v iron out, it does appear that shipping companies are unlikely bongdaso v make any swift decisions on routes and with good reason.

Source: https://www.aircargonews.net/supply-chains/shipping-lines-unlikely-bongdaso v-make-a-quick-return-bongdaso v-suez-canal/1079572.article

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