Before this year, Tobias Kammann, a German container ship captain, had only once sailed around the southern tip of Africa, and the lack of other vessels in the little-trafficked waters made him feel very much alone. But these days, there are so many ships there, he said, that "it's a bit like the autobahn." To get from Asia to Europe and back, global shipping companies have for decades sailed through the Red Sea and the Suez Canal . But a year ago, the Houthi insurgents in Yemen began targeting vessels in the Red Sea with drones and missiles, forcing shipping companies to divert their cargo around the Cape of Good Hope at Africa's southern tip, a route that is some 3,500 nautical miles and 10 days longer. Western-led naval fleets were sent to the Red Sea to quell the attacks, which the Iran-backed Houthis said were a response to Israel's war on Hamas in the Gaza Strip. Despite those deployments, the attacks continued, and commercial vessels have, for the most part, stayed away. And Middle East analysts said they expected the Houthis to keep up their attacks even as Iran's influence in the region has diminished after the weakening of Hezbollah in Lebanon and the collapse of Bashar Assad's government in Syria. It's as if the shipping industry had been transported back to the days before the Suez Canal opened in 1869. 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On average, 136 container ships a week have traveled around the Cape of Good Hope this year, compared with 40 before the Houthi attacks started, according to data from Lloyd's List Intelligence, a shipping analytics company. Now, as this great diversion enters its second year, the costs are piling up for importers, the environment and countries like Egypt that rely heavily on maritime revenue. And the stress on shipping is likely to increase if companies rush to bring in imports before any tariffs imposed by the next Trump administration. Ocean freighters have avoided the Suez Canal before. It was shut from 1967 to 1975, a period of conflict in the Middle East. But then Western economies were far less reliant on imports from Asia. Before the Houthi attacks, the canal handled 10% of world trade and more than a fifth of global container shipments, according to the United Nations. The Red Sea upheaval came just as importers were enjoying some of the lowest shipping rates in years, thanks to a glut of freighters. The excess occurred after shipping companies ordered a huge number of new vessels in 2021 and 2022, when they were flush with profits from the pandemic-era trade boom. But the diversion around Africa has increased the need for vessels -- more were deployed to maintain regular service over the longer route -- and rates have surged. The cost of shipping a container from Asia to Northern Europe is up 270% in 12 months, according to Freightos, a digital marketplace for shipping. The demand for ships has pushed up rates everywhere. The cost of shipping a container from China to a West Coast port in the United States is up 217% over 12 months. Some importers have been hit with much larger increases. Vassilis Korkidis, president of the Piraeus Chamber of Commerce in Greece and head of a maritime electronics company, said he paid $8,700 for a 40-foot container of goods shipped from Shanghai in September, four times as much as a year earlier because of the longer trip. "We have considerable delays and an incredible increase in transport costs," he said. Economists say the Houthi attacks have contributed to inflation around the world, and importers fear the higher costs will become permanent. "We want to make sure that the world's governments don't see this as a new normal," said Steve Lamar, president of the American Apparel and Footwear Association. NYT News ServiceA map shows the Gulf of Aden between Yemen and Somalia on the Hanoi Express, a freighter docked in Hamburg, Germany, on Nov. 10, 2024. The transport route around the southern tip of Africa was once little used -- but freighters are now forced to take it and are charging higher rates. Last month, the group called on President Joe Biden to do more to stop the Houthis, who have carried out some 130 attacks on commercial ships in 12 months, according to data from the Armed Conflict Location and Event Data Project, a crisis monitoring organisation. The rise in shipping rates has well exceeded the rise in costs at the big shipping companies, driving their profits sharply higher. The ocean division of Maersk, the Danish shipping giant, reported operating earnings of $4 billion in the third quarter, up from $1.1 billion a year earlier. Maersk declined to comment. The crew on commercial ships are feeling the strain of the longer voyages. Kammann, captain of the 1,309-foot-long Hanoi Express for Hapag-Lloyd, a German shipping company, said his vessel did not stop at a port for as long as six weeks on the route around Africa. To break the monotony, he said, he has tried to devise more engrossing training drills and organize events like barbecues and karaoke for his crew. "I have to make it more interesting for them," he said. Stephen Cotton, the general secretary of the International Transport Workers' Federation, which represents seafarers and other workers, said he was concerned about crews on ships that carry bulk cargo, like coal, iron ore and fertilizer. Operators of those carriers, he said, sometimes do not tell their crew members the routes they will be traveling -- and they may end up going through the Red Sea. "This sense of anxiety and not knowing if you're a target is an issue," he said. The diversion has hurt economies, too. Large container ships can pay as much as $1 million to go through the Suez Canal, according to industry executives. Lloyd's List data shows that passage through the canal has fallen 70%, which has deprived Egypt's government of revenue at a time when its budget has been severely constrained. The International Monetary Fund said in August that Suez Canal receipts at Egypt's central bank had fallen nearly 60% in the first quarter of 2024, compared with a year earlier. Before the Houthi attacks, ships used to emerge from the Suez Canal and dock first at the port of Piraeus in Greece, where they unloaded goods onto feeder ships for other Mediterranean ports, including Valencia in Spain. Now, the ships go to Valencia before Piraeus, which initially contributed to a steep drop in cargo for Piraeus. Traffic has largely recovered, said Angelos Karakostas, deputy CEO of Piraeus Port Authority. "Ships didn't stop coming to Piraeus -- they just took longer to get here," he said. The environment is also paying a price. Deploying more ships over longer distances burns more fuel, making it harder for shipping companies to reduce their carbon emissions. Inverto, a supply chain consulting firm, calculates that the Red Sea crisis has led the industry to pump out an extra 35.7 million metric tons of carbon dioxide in the past 12 months, equivalent to the emissions of 7.8 million cars. Not all shipping lines are avoiding the Red Sea completely. COSCO, the Chinese shipping giant, has rerouted its vessels, but some Chinese ships use the Red Sea. CMA CGM, the French logistics company, sends most of its vessels around the Cape of Good Hope, but it runs a weekly service through the Red Sea called the Phoenician Express. Jennifer Petrisko, a company spokesperson, said the ships took the route with an escort by international forces. "The group's priorities have always been the safety of seafarers, the vessels and our customers' cargo," she said in a statement. If shipping companies continue to shun the canal, Mercogliano said the industry would probably come up with new ways to make the route around Africa more efficient. One remedy, he said, would be to build larger container ships. The closing of the Suez Canal during another conflict, in the 1950s, helped spur the development of much larger supertankers for transporting oil. "Shipping will always find a solution," Mercogliano said. Nominations for ET MSME Awards are now open. The last day to apply is December 15, 2024. Click here to submit your entry for any one or more of the 22 categories and stand a chance to win a prestigious award.
