Red Sea attacks cause spike in shipping costs. What that means for US

Container ship traffic in the Red Sea — a vital artery of international trade — has declined to its lowest level in months amid a string of Houthi attacks on vessels, according to new data.

An average of 28 container ships sailed through the Red Sea between Jan. 7 and Jan. 9, the lowest number recorded since at least Nov. 1, according to data shared with McClatchy News from MariTrace, a maritime intelligence company.

“We’re seeing the industry has responded enormously since the latest attacks by the Houthis began in November — compounded by the increased regional risks to shipping coming through the Suez Canal,” Sally Daultrey, a senior research associate at MariTrace, told McClatchy News in a phone interview.

The drop in traffic comes as Houthi rebels in Yemen have launched missile and drone attacks on merchant ships passing through the region in an attempt to prompt a cease-fire in Gaza.

In response, a U.S.-led naval task force has been patrolling the Red Sea in an effort to secure shipping lanes, shooting down dozens of Houthi drones and missiles Jan. 9 alone, according to the Defense Department.

“This is the 26th Houthi attack on commercial shipping lanes in the Red Sea since Nov. 19,” the Defense Department said. “There were no injuries or damage reported.”

What the data shows

Following the outbreak of the Houthi attacks in mid-November, many of the world’s largest container ship companies, including Maersk and MSC, announced they would reroute their vessels away from the Red Sea, which leads to the Suez Canal, Daultrey said.

“We see a decline in container traffic through the Red Sea since November and even more so since December,” Daultrey said.

Roughly twice as many ships were logged in the Red Sea in early November as compared to early January, according to MariTrace data.

Vessels bound for Europe or North America that opt out of the Red Sea route must instead go around Africa, a route that adds weeks of travel time and is not without risk.

The Red Sea has not been completely abandoned by commercial ships, though, indicating the situation has not reached a crisis point, Daultrey said.

In fact, the number of tankers, which carry oil and gas, that pass through the region has remained largely constant in recent months, according to MariTrace data.

“We haven’t really seen the interruption to tanker traffic that everyone was expecting,” Michelle Wiese Bockmann, a shipping analyst at Lloyd’s List, told Reuters, which noted the Houthis have largely avoided attacking oil tankers.

When sailing through the Red Sea, though, vessels have begun to take extra precautions, Daultrey said.

“Using their AIS channel, many ships have begun advertising that they’re carrying an armed guard onboard,” she said. “That’s an interesting development in the last three days.”

The attacks have also “enormously” driven up shipping costs, as companies face longer routes, higher insurance premiums and a scarcity of containers, Daultrey said, citing media reports and other analyses.

The average global cost to transport 40-foot-long containers has almost doubled since November, according to the Wall Street Journal.

Will Americans be affected?

Shipping companies, however, are not suffering from the uptick in prices as they are able to pass their incurred costs onto consumers, Daultrey said.

“Everybody’s going to be affected at some point,” she said.

By around March, it’s likely some consumer goods such as furniture and electronics will tick up in price or disappear from stores, adding to existing inflation problems, while food and oil are less prone to be immediately affected, Daultrey said.

“And the long run effects of this are likely to continue for months because of all the delays,” she said.

The long term impact will also depend on how successful the U.S.-led naval task force is at preventing further attacks in the region, she said.

“It may take several months for relative calm to prevail,” Allen Morrison, a professor at the Arizona State University, previously told McClatchy News.

This story was originally published January 10, 2024 at 2:30 PM with the headline "Red Sea attacks cause spike in shipping costs. What that means for US."