Friday, January 26, 2024

Red Sea diversions add nearly $1 million per voyage to shipping costs while doubling transit time 

Average monthly Suez transits down by a third as diversions around South Africa increase

LONDON, 25 January 2023: The incremental costs of diverting a tanker from Asia to NW Europe via the Cape of Good Hope is accounting for an extra $932,905 USD per voyage while increasing transit time from 16 days to 32 days according to a report by LSEG Shipping Research.

These additional costs mostly accounts for extra fuel and increases costs for an Aframax tanker by 110%, while for a large container vessel it increases by 35% for a voyage between Asia to NW Europe.

Transits through Suez have been hugely affected following the Red Sea attacks. Average monthly transits through the Suez from June to November 2023 was seen at 1914. This dropped to 1672 in December, a 12.6% drop in transits and January month-to-date transits are assessed at 947 as of 22nd Jan, which translates to a 32.6% decline.

Daily container vessel traffic within the Red Sea have dropped by almost 60% since mid-December, with the larger container ships being the most responsive to avoid the region as their transits have declined by over 80%.

For those that elect to transit via the Red Sea, ships are also using AIS to broadcast deterrence messages in addition to standard security protocols.

Fabrice Maille, Global Head of Shipping at LSEG, comments: “As we saw with the grounding of the Ever Given in 2021, the importance of the Suez Canal and the Red Sea to global trade cannot be understated.

“The impact of this conflict is therefore considerable leading to very difficult decisions to be made regarding financial costs and security risks. 

“Our customers are bringing together a vast array of data points from insurance premiums, average speed, and even AIS messages aimed at threats, in real-time, to mitigate these risks effectively. Their feedback is also helping us develop tools and solutions to help respond to future crises.”

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