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.
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.
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.
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.