Unrest in the Red Sea is driving up container prices and forcing shipping companies to take alternative routes

Published on 2 January 2024

The unrest in the Red Sea, mainly caused by attacks by Houthi rebels, has far-reaching consequences for the global shipping industry. Not only do the attacks force shipping companies to take additional measures, but they also have a direct impact on container prices. The escalation of the conflict has led to eighteen logistics companies deciding to avoid the Red Sea route for the time being, with consequences for the price of container transport.

The increasing threat from Houthi rebels in the Red Sea has led to rapidly rising container prices, which have more than tripled in recent weeks. According to the ANP, the price for a container trip between China and Europe was still approximately $850 at the beginning of December, but has now risen to almost $2,700.

The attacks by Houthi rebels are forcing shipping companies to take extra precautions to ensure the safety of their ships and crew. One of these measures is detouring via the Cape of Good Hope as an alternative route. However, these adjustments not only have operational consequences, but also entail significant costs, which has a direct impact on container prices.

Despite the protective measures taken, many shipping companies do not dare to take the risk of passage without problems. The head of the international shipping organization IMO told the UN Security Council on Wednesday that eighteen logistics companies have decided to avoid the Red Sea route for the time being. These companies, which represent a significant portion of the global logistics industry, choose to prioritize the safety of their ships and crew.

The Netherlands, together with eleven other countries, has called on the Houthis to immediately put an end to the 'illegal' attacks on commercial and naval ships in the Red Sea. Outgoing Minister of Foreign Affairs Hanke Bruins Slot emphasized that these attacks pose an unacceptable danger to ships and sailors worldwide. The international community is hoping for a quick solution to restore safety in the Red Sea and prevent further price increases in the container sector.

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