Carriers avoid Suez and Panama Canals in wake of Pirate Attacks and Drought
Shipping companies are rerouting vessel traffic away from the Suez Canal and the Red Sea following a series of attacks on commercial ships.
There has been a surge in attacks since Yemen’s Houthi militia broadened a threat to target
Israel-affiliated ships to include all ships sailing to Israel. In the past few days, attacks from
Houthi-controlled Yemen struck Hapag-Lloyd’s Al Jasrah and MSC Palatium III, which are both
Liberian-flagged containerships. Other vessels such as Maersk Gibraltar were targeted without being hit, according to Reuters whilst MSC confirmed over the weekend that MSC Palatium III was attacked while transiting the Red Sea under a sub charter to Messina Line.
As a result, all three shipping companies have announced they intend to pause all container movements through the Red Sea until further notice. Shipping intelligence platform Xeneta believes the missile and drone attacks on merchant ships in the Red Sea and Gulf of Aden could trigger a global supply-chain crisis.
“All ships transiting the Suez Canal must sail through the Red Sea and Gulf of Aden and the Houthi militia has made clear that any vessel is a target,” Xeneta chief analyst Peter Sand said.
More than 50 vessels transit the Suez Canal every day, carrying billions of dollars of goods to and from North Europe, Mediterranean and North America East Coast. Due to the importance of the Suez Canal to global supply chains, even a small disruption can have big consequences, like those experienced after the Ever Given incident in 2021.
This news also comes off the back of worsening drought conditions in the Panama Canal forcing the Panama Canal Authority to make cuts to vessel traffic which will reach over a 40% reduction of vessels passing through by February.
According to MarineTraffic, wait times have increased on the Atlantic side from last week on average by 30% (0.4 days to 0.6 days) and on the Pacific side, wait times have increased to 2.2 days. In response to these new measures, most carriers have implemented a ‘Panama Canal Surcharge’ to deal with the additional running costs and delays.
The main alternative to utilising either canal is to sail around the Cape of Good Hope, which adds up to 10 days sailing time for services from Europe and the East Mediterranean to Oceania and significant additional running costs for vessel operators.
Our team is closely monitoring the situation and will provide further updates as they become available.
Industrial Action Continues at DP World
The Maritime Union of Australia has continued its campaign of Protected Industrial Action at all DP World Terminals across Australia leading to further delays for affected vessels and truck congestion at the ports.
Truckers are reporting wait times have increased on average from 60-70 minutes to drop off or collect a container, up to 2 hours and 17 minutes this week. Vessel dwell times at each terminal are shown below with DP more than tripling the vessel wait times of other terminals.
Carriers have indicated an increase freight rates are coming to deal with the ongoing delays. Industry bodies are now predicting the dispute and industrial action will last through to next year, possibly beyond January so shippers should be prepared for additional days when calculating lead times into and out of Australia as well as a likely increase to freight rates from Q1 next year.
European Emissions Trading System
As of 1 January 2024, shipping will be included into the EU Emissions Trading System (ETS), which sets an annual absolute limit on emissions of certain greenhouse gases (GHG) and requires the purchase of allowances for emissions.
The EU ETS works on the ‘cap and trade’ principle. A cap is a limit set on the total amount of greenhouse gases that can be emitted by vessel operators. The cap is reduced annually in line with the EU’s climate target, ensuring that emissions decrease over time.
Since 2005, the EU ETS has helped bring down emissions from power and industry plants by 37%.
From the 1st January, all carriers shipping into and out of Europe will fall under the new system and be required to charge and collect a fee for every container shipped in line with the emissions produced by operating their fleet.
In an effort to reduce emissions, Maersk is preparing to launch the first of 18 large methanol-enabled vessels currently on order. The first of these containerships is due to enter service on 9 February 2024 on the AE7 Asia-Europe trade lane.
The new vessel, built by Hyundai Heavy Industries in South Korea, has a nominal capacity of 16,000 TEU. It has a dual-fuel engine to enable operations on methanol as well as biodiesel and conventional bunker fuel.
Maersk said the company has secured sufficient green methanol to cover the vessel’s maiden voyage. “Deploying the first of our large methanol-enabled vessels on one of the world’s largest trade lanes, Asia – Europe, is a landmark in our journey towards our net-zero target,” Maersk chief commercial officer Karsten Kildahl said. “With the vessel’s capacity of 16,000 containers, this will make a significant impact in our customers’ efforts to decarbonise their supply chains, and we are looking forward to introducing more methanol-enabled vessels on this and other trades during 2024.”