Red Sea Disruption Update

The ongoing situation in Gaza has recently sparked targeted attacks on Israeli-owned vessel cargo. The situation has escalated and expanded to include threats of attack on any ship that calls at Israeli ports and further evolved to the point that all ships are being targeted without any apparent connection to Israel. Out of caution, carriers have begun to divert their vessel transits of the Red Sea and Suez Canal. Maersk and Hapag-Lloyd vessels that were set to pass through the Bab al-Mandab Straight will cease their journey until further notice. CMA vessels have been instructed to reach safe areas and pause their transits until further notice. MSC has suspended all transit of the Suez Canal in either direction, and many of their services will be rerouted to go via the Cape of Good Hope. The diversion to Cape of Good Hope is the primary alternative to avoid transit of the Suez Canal, and we expect many other carriers to announce this move as well.

This stoppage and diversion of vessels will have an immediate and long-lasting impact on equipment availability and flow of goods if the situation does not improve quickly. Operating costs could increase, emergency surcharges could be implemented and transit times could be extended by up to four weeks. For more information, please find the attached article from Freightwaves for reference. Additionally, several insurance providers have announced premium increases for cargo traveling to/from Israel and Lebanon, and other providers have refused coverage to/from that region altogether. The January 1 reinsurance treaties are also on the radar, as they can restrict coverage provided by cargo insurers, which is a likely probability given the current situation. 

We will continue to monitor this situation and provide updates as they are available.