Global Shipping Crisis: Houthi Attacks and Container Shortages Disrupt Maritime Trade

June 23, 2024 The global maritime industry is facing unprecedented disruptions due to a combination of intensified Houthi attacks in the Red Sea and an acute shortage of 40-foot high-cube containers affecting export shipments from Bangladesh. These issues are causing significant delays, escalating costs, and widespread uncertainty in international trade.

Houthi Attacks Slash Red Sea Throughput

Houthi attacks on shipping in the Red Sea have reduced container throughput by a staggering 90%. According to a US Defense Intelligence Agency (DIA) report, the escalating threat has driven up insurance costs and led to heightened security risks, deterring carriers from using this vital route.

The report details how re-routing vessels around Africa, adding approximately 11,000 nautical miles and $1 million in fuel costs per voyage, has become a more favorable option compared to navigating the crisis-stricken Red Sea. “For many shipping companies, the combined costs of crew bonuses, war-risk insurance, which has surged to around 1,000% more than pre-war levels, and Suez transit fees make the additional time and financial burden of travelling around Africa less expensive,” the report states.

Insurance premiums for Red Sea transits have skyrocketed to between 0.7% and 1% of a ship’s total value, up from less than 0.1% before the escalation of attacks in December 2023. The report indicates that at least 65 countries have been affected, highlighting the Iran-backed rebels' indiscriminate targeting. Over a dozen commercial vessels have been hit by drone and missile attacks, with significant incidents including the sinking of the UK-owned cargo ship Rubymar in March and the seizure of the Israel-linked Galaxy Leader in November.

Despite increased naval support, the attacks continue. The UK Maritime Trade Operations reported two more incidents over the weekend, including one involving a Greece-owned coal carrier, forcing the crew to abandon ship in the Mediterranean. The ongoing threat underscores the need for robust security measures and international collaboration to safeguard maritime routes.

Container Shortage Hits Bangladesh Exports

Simultaneously, the shipment of export cargo from Bangladesh is being hampered by a severe shortage of 40-foot high-cube containers. Major liner operators like MSC and Hapag Lloyd are struggling to reposition equipment from nearby ports to alleviate the crisis.

The situation is worsened by congestion at the Port of Singapore, where hundreds of Bangladesh-bound containers are stranded due to berthing delays. Additionally, a significant number of 40-containers are stuck at Chittagong port as importers delay collection because of the Eid holidays.

Ruhul Amin Sikder, secretary general of the Bangladesh Inland Container Depots Association, reported widespread shortages of 40-containers across carriers. “Some carriers have adequate equipment supply, while others have severe crises,” Sikder stated. He noted that most Bangladeshi exports are shipped in 40-containers, while imports mainly arrive in 20-boxes. Carriers bringing imports from Europe and America are particularly affected by equipment shortages.

An MSC Bangladesh official confirmed efforts to reposition equipment to meet the 40-container requirement. However, the shortage is expected to persist until the congestion at Singapore normalizes, according to another official from a large box line.

Combined Impact on Global Trade

The combined impact of Houthi attacks in the Red Sea and container shortages in Bangladesh is creating a ripple effect across the global supply chain. Shipping companies are facing increased operational costs, delayed shipments, and logistical challenges, affecting trade flows and market stability.

As the maritime industry navigates these complex challenges, there is an urgent need for comprehensive strategies and international cooperation. Ensuring safe passage through critical maritime corridors and addressing equipment shortages are essential to restoring confidence and efficiency in global trade routes.