In recent days, tensions in the Red Sea region have intensified, and a potential black swan event of geopolitical conflict has finally erupted. MSK, HAPAG, CMA and MSC have successively announced the suspension of their services through the Red Sea, a decision that has had a significant impact on the Nordic route.
1. Background of the event.
Over the past few weeks, the issue of geopolitical conflicts in the Red Sea region has been worrying the market. Against the backdrop of the Israeli-Palestinian conflict, Yemen's Houthi rebels have publicly stated on social media that ships linked to Israel are all subject to attacks. Subsequently, many ships not related to Israel were also attacked by the armed forces, and many of them took a detour of the Cape of Good Hope to avoid risks.
Last Friday, news came from the market that the ships of MSK and HAPAG had been attacked. Subsequently, MSK and HAPAG announced the suspension of all services on routes through the Red Sea. Soon after, CMA joined the bandwagon. Subsequently, the market once again reported that MSC's container ships had also been attacked, and MSC also announced the suspension of services through the Red Sea route. So far, the top four major companies in the container shipping industry have suspended all route services through the Red Sea in just two days, and the black swan of the container shipping industry has really come.
2. Impact on Nordic routes.
The company usually transports goods from the Far East to Northwest Europe via the Suez Canal, the Cape of Good Hope and the North Pole, with the Suez Canal being the most commonly used route. As the Red Sea is a necessary route through the Suez Canal, the suspension of services through the Red Sea has had a significant impact on the Nordic route.
First of all, for ships already passing through the Suez Canal, they had to go around the Cape of Good Hope. This will result in an increase in range of about 3,280 nautical miles, which will increase the outbound time of the Nordic route by about 9-11 days. This means that the Nordic Mediterranean route has become one of the main victims of the suspension of the four major flights due to the escalation of the geopolitical conflict.
Secondly, from the perspective of capacity, there are currently 23 routes in the Far East and Northern Europe in the market. According to estimates, 11 ships would be needed to maintain a normal weekly service level. However, according to an analysis of the increase in time to circumnavigate the Cape of Good Hope, maintaining the same weekly service level would require 2 additional vessels, i.e. 4 routes that could not be operated per week, resulting in a loss of capacity of about 17 per week4%。
In addition, from a macro perspective, the Suez Canal accounts for 16% of the world's container freight traffic0%, and container freight volume accounted for 334%。Therefore, the Suez Canal is of great importance to the world. The four major classes have a huge share of capacity on the Nordic route, totaling 535%。This means that more than half of the capacity on the Nordic route has been severely affected.
III. Conclusion. The Red Sea conflict led to the suspension of service between the flight companies and the Nordic route, which had a significant impact on the Nordic route. Since the ship has to circumnavigate the Cape of Good Hope, this will increase the voyage and time cost. At the same time, the loss of capacity will also have a negative impact on the operation of the Nordic route. However, in order to meet this challenge, the team may take some steps to reduce costs and increase revenue. For example, they may raise costs such as war insurance and fuel surcharges and pass these costs on to cargo owners (consumers). In addition, the company may need to re-evaluate its route strategy and operating model to adapt to this new reality.