Terrorist groups plaguing shipping in the Red Sea have resumed attacks on warships in the area, after the U.S. launched a series of air strikes in Yemen on or about Saturday 15 March.
After Hamas, a political-militant group, carried out terrorist atrocities in Israel on 7 October 2023, this led to the Israeli invasion of the Gaza strip and the ongoing War in Gaza. The Red Sea Crisis began on 19 October 2023 when Houthi terrorists in southern Yemen launched missiles at Israel demanding an end to the invasion of Gaza. They also announced a campaign of solidarity with the Palestinians in Gaza. From January 2024, an international coalition began a bombing campaign in Yemen. From October 2023 to at least December 2024, there were attacks on commercial shipping by drones and missiles, leading to several vessel abandonments, kidnappings of seafarers, and several murders of commercial seafarers. Naval vessels were also attacked by the Houthis.
The Houthis announced on 20 January 2025 that they would stop attacking ships transiting the Red Sea. Their last attack on commercial shipping apparently took place in late December 2024. An armistice between Israel and Hamas took effect from 19 January to mid-March. On Tuesday 12 March 2025, the Houthis announced they would resume attacks on Israeli shipping in the Red Sea. On 15 March, U.S. President Donald Trump ordered large-scale military attacks against the Houthis on Saturday 15 March 2025 over Houthi attacks on Red Sea shipping. On 18 March, Israel launched artillery and air strike attacks on Gaza. The Houthis have since attacked U.S. warships.ย
It is clear that cease-fire is over.
Consequences of the resumption of hostilities
Larger, and more expensive vessels (larger vessels are typically more expensive, and there are smaller but more expensive vessels), and vessels carrying large amounts of valuable cargo (such as very large ocean-going container ships) are reported to be avoiding the Red Sea. It has been claimed that the major ocean container-shipping companies are sending their ships around the southern tip of Africa (also known as “sailing around the Cape” after the Cape of Good Hope, a rocky promontory that juts out into the South Atlantic Ocean).
Vessel tracking websites are still showing numerous ships going through the Red Sea, including some smaller container ships.
Internationally regarded container shipping analyst, Lars Jensen, comments that the shipping industry is realistically “now looking at a 2025 where the deviation around Africa could continue in the peak season over summer. This means a continued strong supply/demand balance, albeit not with the same strength as in peak season 2024 due to the continued delivery of more tonnage – provided demand growth holds up”:.
Their alternative route from Asia-to-Europe and Europe-to-Asia is therefore around the bottom of South Africa, which is a considerable increase in distance, time, and, of course, operating costs.
Assuming a speed of 22 knots (note: we have done some rounding below):
โข Singapore-Rotterdam through Suez = 8,288 nautical miles with a transit time of 16 days via Suez
โข Singapore-Rotterdam around South Africa = 11,755 nautical miles with a transit time of just over 22 days via South Africa
So the longer of the two routes is 41.8% longer in distance and 37.5% longer in time. Longer sailing times and distances mean that it will likely be considerably more expensive for ships to sail around South Africa than sail the shorter route through the Canal (although there are savings on Suez Canal fees if the the longer route is followed, however, the cost of insurance for larger / more valuable ships to go via the Red Sea would be prohibitive).
Meanwhile, global container volumes are apparently showing strength, reaching 15.4 million TEU in January 2025, a year on year growth of about 5.8% and that global TEU x Miles grew by 8.1%, according to analysis from Sea Intelligence, a leading container analysis firm.
“TEU*Miles growth rates were even higher throughout 2024, more than 20%, but this was due to the rerouting of container services from Suez to round-Africa due to the Red Sea crisis and thus not by an underlying strength in container demand. January 2025 is the first month with an apples-to-apples Y/Y comparison of going round-Africa, so the 8.1% Y/Y growth reflects real, distance-adjusted container demand,” Sea-Intelligence reported.ย
So the key thing is that the longer route takes shipping supply out of the market. And if supply falls while demand remains steady or rises – as the Sea Intelligence analysis indicates it is – then price (i.e. the spot freight rate) is likely to be subject to upwards pressure.ย
Meanwhile, charter rates
Charter rates for ships have increased of late. A lot of ships are not owned by the people who operate them. The operators will hire a certain volume of ships from ship owners, for various commercial reasons. The cost to hire a ship is currently spiking, according to the Harper Petersen Index. Back in April-ish 2024, the cost to hire a 2,500ish TEU ship was about USD$17,500 a day. That daily rate is currently about $31,500 a day (thatโs just the hire rate, excluding things like crewing costs, fuel, insurance, etc) and thatโs roughly an 80% increase.
