Red Sea Crisis: Shipping industry association warns rerouting may spike costs by 80%

The rerouting of ships to Europe via the Cape of Good Hope due to ongoing attacks on containers in the Red Sea could lead to an increase of up to 80% in shipping costs.

Sunil K Vaswani, Executive Director of the Container Shipping Lines Association, explained that rerouting necessitates the use of extra capacities, leading to higher costs. He noted that if the situation continues, customers may have to shoulder the burden of these increased expenses

The Red Sea, a vital maritime route, has become a focal point of concern due to attacks by Houthi rebels. These attacks are disrupting global trade as commercial ships passing through the Suez Canal, a critical sea route connecting Asia and Europe, are targeted.

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Speaking on the recent attacks, Vaswani noted that some ships were attacked, forcing others to divert their services from the Red Sea and Suez Canal to the Cape of Good Hope. This rerouting increased transit time by about 10 days, leading to additional costs, including higher insurance expenses.

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"If you are operating a service between India and Europe, the round trip takes about 56 days for 8 ships if you are taking the shortest route via the Suez. But if you are going over the Cape of Good Hope and adding another 10 days, then you need to put in one additional ship," he noted .

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The recent attacks in the Arabian Sea have heightened concerns among traders, prompting the Indian Navy to deploy guided missile destroyers to maintain a deterrent presence in the region. The attacks on ships carrying crude oil underscore the fragility of key maritime routes and the potential economic repercussions if the situation escalates further.

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