Amid the turbulent situation in the Red Sea, the cost of alternative international shipping routes has indeed increased significantly.
Due to recent attacks on ships by Yemeni Houthi rebels in the Red Sea, major shipping companies have opted to use the longer and more expensive route around the Cape of Good Hope in Africa. Data from logistics technology company Flexport shows that 299 container ships that normally transit the Red Sea and the Suez Canal have changed their routes. These vessels carry a combined capacity of 4.3 million containers, representing approximately 18% of global shipping capacity.
Going around the Cape of Good Hope can take 25% longer than using the Suez Canal, and shipping companies are expected to see freight costs soar by 15% to 20%. Furthermore, these diversions will lead to increased costs, such as higher fuel costs and potential insurance premiums due to the extended transit time. For example, sailing around the Cape of Good Hope adds approximately 6,000 kilometers to a voyage from Asia to Europe. At a speed of 14 knots, this can add 10 days or even two weeks to the journey, significantly increasing costs.
These increased costs may ultimately be passed on to consumers, leading to higher prices for everything from oil to clothing and food.
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