A. P. Moller Maersk AMKBY, the world’s largest container shipping company, has announced that the ongoing disruptions in the Red Sea will significantly impact the industry’s capacity in the second quarter.
What Happened: The disruptions, caused by attacks from Iran-aligned Houthi militants, are expected to reduce the shipping industry’s capacity between the Far East and Europe by 15%-20% in the second quarter, reported Reuters.
“The risk zone has expanded, and attacks are reaching further offshore. This has forced our vessels to lengthen their journey further, resulting in additional time and costs to get your cargo to its destination for the time being,” Maersk said in an updated advisory to customers on Monday.
Maersk and other shipping companies have been rerouting vessels around Africa’s Cape of Good Hope since December to avoid these attacks. This has led to longer voyage times and subsequently increased freight rates.
The Danish shipping giant, often seen as a barometer of global trade, has warned that the risk zone has expanded, with attacks reaching further offshore. This has forced vessels to take even longer routes, resulting in additional time and costs to deliver cargo.
Maersk has also noted that the disruptions are likely to persist until the end of the year, leading to bottlenecks, vessel bunching, and shortages of equipment and capacity. The company is taking measures to enhance reliability, including faster sailing and the addition of capacity. It has already leased over 125,000 additional containers.
Why It Matters: The disruptions in the Red Sea have been ongoing for several months. In April, the U.S. military launched strikes against Houthi air defense systems in Yemen, aiming to safeguard the Red Sea’s shipping lanes. Despite these efforts, the disruptions have continued, impacting global trade and shipping capacity.
These disruptions are part of a broader pattern of geopolitical tensions in the region. In April, Iran’s nuclear facilities in Isfahan province were reportedly targeted in an Israeli strike, further escalating tensions in the area.
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