The number of shipping companies refusing to risk Red Sea transits is growing by the day. The waters off the Cape of Good Hope are about to get much busier as more ships circumvent Africa on a detour around the Red Sea and Suez Canal.
As of early Tuesday, companies confirmed or reported to be pausing Red Sea transits and/or rerouting around the Cape of Good Hope included container lines Maersk, MSC, Hapag-Lloyd, CMA CGM, Zim (NYSE: ZIM), Evergreen, Yang Ming, Cosco, OOCL, HMM and ONE; tanker owners Frontline (NYSE: FRO) and Euronav (NYSE: EURN); car carrier owner Wallenius Wilhelmsen; and oil and gas companies BP (NYSE: BP) and Equinor.
That list doesn’t capture the full effect, as ships controlled by other operators are also detouring. Argus reported that three liquefied natural gas (LNG) carriers and three very large gas carriers (VLGCs) diverted from the Red Sea route on Monday.
Longer voyage distances should boost rates
Diversions around Africa are driven by ongoing attacks on commercial shipping by Yemen’s Houthi rebels near the 20-mile-wide Bab-el-Mandeb Strait.
The attacks continue. According to U.S. Central Command, there were two more attacks on Monday: on the product tanker Swan Atlantic and on the bulk carrier Clara.
Ship diversions around the Cape significantly extend voyage distance, increasing shipping demand measured in ton-miles (volume multiplied by distance) and constraining transport capacity, a positive for rates.
