Reports

Month of Mayhem: January Red Sea Crisis Report 

January 2024 may be remembered as the month the U.S. and UK began striking Houthi targets in response to the months-long Red Sea crisis. The geopolitical tension that has been building since the first Houthi rebel attack in November emerged in full force in January. 

The Houthis succeeded in significantly altering the trade routes of major energy companies and carriers, slowing the global supply chain by causing organizations to avoid the Red Sea region. 

Many vessels are now taking the long detour around the Cape of Good Hope, adding weeks to their journeys. The disruptions have spiked insurance costs, transit times, and shipping prices. To give just one example, the price of shipping containers from East Asia to North Europe increased 243% to $5,456 from December 2023 to January 2024. The economic impact is just beginning to take its toll on shipping stakeholders, with industry experts predicting the downturn will have staying power.

The Red Sea crisis has meant a shakeup across the board, with almost everyone feeling the effects – from tactical disruptions to global trade, severe economic harm to companies and countries, and security challenges that must be understood and addressed.

Two important new capabilities that can support stakeholders’ business and safety efforts during this crisis are detailed at the end of this report. 

The Serious Impact of Major Carriers’ Route Deviations

As the new year began, Danish shipping company A.P. Moeller-Maersk announced a pause of all transits through the Red Sea and Gulf of Aden following an attack on its vessel, Maersk Hangzhou. That same day, German shipping giant Hapag-Lloyd also declared its intention to steer clear of the Suez Canal and the Red Sea. 

Towards the end of the month, mining giant BHP Group joined the trend and also started diverting shipments from Asia to Europe away from the Red Sea, instead choosing to circle the Cape of Good Hope. 

These decisions by major carriers likely created a domino effect and had an immediate impact on all types of ships. 

General Cargo and Bulk Carriers

General cargo and bulk carriers exhibited noteworthy decreases in the percentages of vessels avoiding Bab-al-Mandeb and the Suez Canal (January 2023 to January 2024 comparison). 

There was only a 14% decrease in the daily average of general bulk and bulk carriers passing through Bab-al-Mandeb and a 16% decrease for the Suez Canal in January 2024. The Cape of Good Hope had a significant increase, but a more modest one compared to container ships: a 50% rise compared to January 2023.

Tankers

It makes sense that many tankers – the vessels carrying oil, oil products, and liquified chemicals – would avoid the threat of missile attacks. Imagine the environmental disaster that could result if a Houthi missile hit an oil tanker, not to mention the costs of a severely damaged vessel and the lost oil onboard, potential insurance premium rises, etc. 

Windward’s Maritime AI™ found: 

  • A 40% decrease in tankers passing through Bab-al-Mandeb 
  • A 37% decrease for the Suez Canal 
  • A 90% increase in tankers sailing by the Cape of Good Hope

 

Container Ships 

Windward observed a 70% and  60% decrease in the daily average of container vessels passing through Bab-al-Mandeb and the Suez Canal, respectively, when comparing January 2024 to January 2023. 

The Cape of Good Hope saw a huge spike compared to a year earlier: a 216% increase in the daily average of container vessels passing through! Many container ships and crews clearly did not want to risk close proximity to the Houthi rebels and their missiles.

This is also reflected in the range of Windward’s exceptions and critical-event alerts. All top carriers engaged in route deviations, according to our data from December 2023-January 2024. Among the total exceptions flagged by Windward’s platform to its customers, the Taiwanese company Yang Ming experienced the highest rate of route deviations from the Red Sea, at 81%.

These unexpected diversions had quite an impact on transit times for popular trade flows.

The average transit times from Asia to New York and Newark during Q4 of 2023 was 25.2 days. In January, it increased by 22.5% to 31 days.

Transit times from Asia to other ports increased dramatically, as diverted vessels began to arrive after their long transits. Port Said saw average transits reach 30.1 days, compared to 12.2 days last month. Piraeus saw similarly dramatic increases, at 27.8 days vs. 14.1 days

Gioia Tauro reached a 28.7-day average for transits in January, but that only rose from 24 days, as diverted vessels already began arriving there last month. 

Here are the percentage increases in transit times from Asia to the Mediterranean (September vs. January):

  • Asia-Ambarli: 0%
  • Asia-Barcelona: 51%
  • Asia-Malta: 174%
  • Asia-Gioia Tauro: 250% (it went from 8 to 29 days!)
  • Asia-Pirerus: 139%
  • Asia-Port Said: 138%

We saw similar increases in Europe. From China, Felixstowe saw an 11-day increase to 37.4 days, and nearby Antwerp was much worse, with a 49.4-day average transit in January. 

These are the increases in percentages in transit times from Asia (excluding China) to Europe and the UK (September vs. January):

  • Antwerp: 35% increase
  • Rotterdam: 46% increase
  • Algeciras: 51% increase
  • Felixstowe: 35% increase

Major manufacturers – such as Volvo, Tesla, and Suzuki – temporarily paused their manufacturing plants in Europe, due to delays in the supply of parts because of the arbitrariness of Houthi attacks on vessels.  

The key reasons for this pause are not solely the addition of days to the shipment’s journey, or the surge in shipping prices, but also because these large manufacturers cannot afford to be left in the dark. Not knowing when shipments will arrive is a crucial issue that hampers their ability to coordinate haulage properly, plan their inventories, and most importantly, run their production lines without incurring significant costs and revenue loss. 

The increased war-zone risks and longer transit times led to huge price hikes for the shipments and the supporting services, such as insurance.

Shipping Prices Creeping Closer to Pandemic Rates

During our January webinar, Tides of Terror: The Impact of the Red Sea Crisis on Global Trade, Peter Sand, Chief Analyst for Xeneta, gave both a warning and advice regarding pricing.

This period marks the first three-digit increase in shipping pricing in a single month since the COVID-19 pandemic. 

We compared prices with data from Freightos (December 2023 to January 2024):

  • From China/East Asia to North Europe: an increase of 243% to $5,456
  • From China/East Asia to the Mediterranean: an increase of 169% to $6,449
  • From the Mediterranean to China/East Asia: an increase of 687% to $1,330
  • North Europe to China/East Asia: an increase of 305% to $1,263
  • From China/East Asia to the North America East Coast: an increase of 144% to $6,152
  • From North America East Coast to North Europe: an increase of 52% to $5

This surge is particularly noticeable on routes that typically involve passage through the Red Sea, or both the Red Sea and the Panama Canal. Interestingly, not all directions have experienced these increases. For example, while shipping from the East Coast of North America to Northern Europe, there has been a drastic increase. But the reverse route has not mirrored this trend. To understand the full scope of these changes, check out Windward’s Port Insights.

The Operational Impact of Geopolitical Tensions

The redirection of maritime traffic has not only altered global shipping routes and costs, but also reshaped the geopolitical and economic landscapes, affecting bunkering operations and introducing new challenges in detecting and combating illicit activities. 

Windward’s Maritime AI™ platform compared bunkering operations from October 2022-January 2023 vs. October 2023-January 25, 2024 and identified two new bunkering hubs:

  • Mauritius – bunkering operations increased by 61%
  • Cape Verde – they rose by 206%

This makes sense, as these are the “before” and “after” spots when circling the Cape of Good Hope. These two hubs seemed to replace the former Cape of Good Hope hot spot, which showed a 84% decrease when comparing the two time periods. Djibouti’s bunkering operations decreased by 27%, likely due to its proximity to Yemen, but the bunkering operations in the Saudi ports in the Red Sea remained the same.

Also, between October 2023 and January 2024 there has been a 50% increase in bunkering operations in East Asia and a 40% increase in bunkering ship-to-ship engagements in Europe, while there has been a 20% decrease in the Middle East.

Important reminder: bunkering deals can be concluded in as little as fifteen minutes, so organizations cannot reasonably stretch the sales process to an hour to conduct due diligence, without risking a lost opportunity.

While the developing hubs offer fresh business opportunities for some organizations, they significantly impact those who have relied on the consistency of traditional trade flows. Some advice for moving forward: 

  • Shipping companies or operators – this reshuffle can help you source better deals on bunker fuel. Perhaps go to places where the demand is lower to find a better deal.
  • Bunkering companies – things are moving. Get your hands on real-time intelligence and make some calls to new prospects.
  • Port authorities – don’t be unpleasantly surprised by using outdated data. Get real-time intelligence and direct your operations accordingly

Risk vs. Opportunity

The strategic and operational disruptions do not stop at bunkering. The new Red Sea reality made law-abiding vessels and crews go dark in attempts to avoid the Houthi threat. We’ve seen this phenomenon before, such as when vessels would disable their AIS to avoid Somali pirates, but the number of otherwise legitimate vessels that are currently utilizing this technique is noteworthy. 

The weekly average of lost AIS transmissions in the Red Sea and Arabian Sea by cargo, tanker, and container vessels during January 2024 increased by 98%, 28%, and 66%, respectively, when compared to the weekly average of January 2023. 

This trend also has an interesting geopolitical angle to it, as we look into dark and lost activities in the Arabian Sea and Red Sea for tanker vessels. 

Chinese-owned (beneficial owner) tanker vessels were exhibiting lost AIS transmissions/dark activity at the beginning of the conflict, but far fewer in January. The opposite trend was noticed for vessels owned by European or Middle Eastern companies – as the conflict and the attacks progressed, these vessels engaged in more lost AIS/dark activities than at the beginning of the conflict.

For container vessels, Windward picked up on a decrease in dark and lost activity for European ships, perhaps due to rerouting from the area. 

These trends confirm the political alliances that have clearly formed. The Houthi disruptions and retaliatory attacks from the U.S. and UK are further dividing “the East” – China, Iran, and Russia –  from “the West” – the U.S., Europe and select Asian and Middle Eastern countries – even further. 

On a geopolitical level, the Red Sea crisis has provided important insights into power dynamics and strategic alliances. While American and British ships were targeted, China and Russia emerged considerably less disrupted, mostly maintaining their ability to sail through the Suez Canal and even increasing their trade and oil sales.

The Red Sea disruptions not only cause a redistribution of economic opportunities, but also pose challenges for stakeholders in maintaining compliance with international sanctions amidst heightened requirements for due diligence and contextual analysis. 

As organizations navigate these disruptions, the need for innovative solutions and agile insights has never been more critical, highlighting the importance of monitoring the emergence of new hubs, and efficiently screening and flagging risky deceptive shipping practices to secure a stable maritime future.

Beware of Unintended Effects

Reality has changed quickly for the supply chain/logistics and maritime ecosystems since the commencement of Houthi hostilities. It’s possible that we have not yet considered some unintended consequences. 

As noted previously, there has been increased traffic around The Cape of Good Hope, which is a known smuggling route for Russian oil. Unlike the Suez Canal, the Cape does not have checkpoints. Diverting a large number of ships there, rather than through the regulated Red Sea, may make illicit activities – such as oil and commodities smuggling, and illegal, unreported, and unregulated (IUU) fishing and its accompanying great power competition dynamics – easier and more common. 

Additionally, “Is it safer to turn off a vessel’s AIS to avoid Houthi attacks?” has been a common question (also mentioned above). With an increase in otherwise law-abiding vessel crews choosing to disable their AIS to avoid Houthi targeting, it will become more difficult to use dark activity as a marker for illicit activities, at least in the Red Sea region.  

Criminals are quick to exploit uncertainty and disorder. With the entire maritime and supply chain ecosystems disrupted – causing all maritime ecosystem players to shift and change their tactics to adapt – bad actors are emboldened. Put simply, illicit activity becomes easier when chaos reigns. 

Windward Can Help!

The Red Sea crisis shows us how a fluid, high-stakes situation can quickly impact all stakeholders. Data analysis and AI play a critical role in understanding and responding to dynamic global trade conditions, especially when there is a critical need for all stakeholders to be well-informed and adaptable in the face of uncertainty. 

We’ve been collaborating closely with our customers and Windward is working diligently to alleviate these pain points, tasking our top experts and AI models with the challenge of producing new tools and technology. We launched two new key capabilities in the past two months. 

Route Deviation Exception 

This capability, which was launched in December, is part of Windward’s Ocean Freight Visibility solution. It flags route changes caused by the geopolitical crisis in the Red Sea. Stakeholders are provided with early alerts of changes to container shipments that have shifted away from entering the Red Sea, enhancing visibility and enabling them to efficiently adapt to changes and mitigate negative outcomes.

Sequence Search

Windward launched our new Sequence Search capability in January as part of our business intelligence solution. Sequence Search provides the context necessary to understand vessel behavior and trading patterns, and to quickly identify new operational hot spots for a more accurate and strategic decision optimization. 

It’s a unique way for users to conduct advanced analysis of vessels’ behavioral typologies and trade movements by searching for a sequence of activities. It also helps contextualize the journey, enabling users to see if dark activities or route deviations were conducted for security reasons, or for concealing illicit activities. 

With Sequence Search, users can tell if dark activity occurred before a suspicious ship-to-ship (STS) engagement, or simply before entering the Red Sea area.  

Our upcoming webinar, From Disruption to Regulation: AI-Driven Strategies for Steering Maritime Compliance, will feature discussions on how the Red Sea crisis is affecting compliance and how you can leverage AI to help. 

The Foreseeable Future

Houthi rebel attacks are not something for which we can expect a quick solution. There is not any one specific action or event that can quickly re-establish the known order. Geopolitical challenges threaten the safety of crews, cargoes, and vessels. It will take time to rebuild trust that the route through Bab-al-Mandeb is truly safe and unclogged.

Your customers and partners are going to be on edge as this saga continues. Early detection and full visibility will be critical during such a fluid, fast-moving geopolitical quagmire. Without sufficient lead time, you may know what is happening, but you will not be agile or flexible enough to react in time, or strategically. 

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