Over the past three months, the Red Sea has become a hotspot for maritime security incidents, including attacks on cargo ships. The Houthi-led rebel attacks on cargo ships are a consequence of the Israeli-Hamas war. The Houthi military group claims that they will persist with these rebel attacks until Israel halts its war against Hamas.
These attacks resulted in cargo ships being forced to sail around the Cape of Good Hope instead of utilising the Suez Canal. Currently, the Suez Canal is seeing significantly lower levels of ship traffic due to many ships opting for the longer and costlier route around South Africa. The Suez Canal can be considered an epicentre for global trade, processing 10%-12% of worldwide trade and costing approximately $1 trillion annually.
Consequently, transit times are extended by up to two weeks, which has extensive repercussions, such as rising shipping costs. It has been estimated that approximately $200 billion of cargo has been diverted. Not only are ship freight costs increasing, but a rise in air freight rates can also be expected. Many suppliers opt to utilise air freight to ensure faster delivery. However, this potential surge in demand for airfreight is increasing the rates thereof.read report