Resumen Semanal de Logistica [Hot Topic] Analysis of the Red Sea Logistics Crisis and Response Strategy

As the Israel-Hamas conflict continues, Houthi rebels in Yemen, supported by Iran, have been indiscriminately attacking civilian ships passing through the strategic Bab el-Mandab Strait, which connects to the Suez Canal.
On November 14th, after declaring attacks on all ships associated with Israel passing through the Red Sea, Houthi rebels have launched missile or drone attacks on a total of 18 ships as of December 21th, including vessels belonging to Maersk, MSC, and Hapag-Lloyd.

Concerned about the safety of crews and cargo, most major shipping companies such as CMA CGM and Evergreen have temporarily suspended navigating through the Red Sea. Some shipping companies like MSC, Maersk, HMM and Hapag-Lloyd, have opted for an alternative route via the southern tip of Africa, around the Cape of Good Hope, instead of the Suez Canal. Some are considering passage through the Suez Canal with the protection of multinational naval convoys, but this also incurs additional costs and waiting times.

When using the route via the Cape of Good Hope instead of the Suez Canal, the transit distance increases by approximately 6,500 km, and transit time extends by around 10 days. This leads to an estimated increase in transportation costs of about 15-20% compared to the traditional Suez Canal route. The temporary closure of the Suez Canal due to BP's suspension of navigation may result in a sharp rise in international oil prices.
To operate services that divert from the Suez Canal to the Cape of Good Hope on the Asia-Europe route, an additional deployment of 1.5 to 1.7 million TEUs is anticipated. This could absorb some of the severe oversupply in the shipping market, leading to increase in freight rates.
For freight rates of North Europe bound routes, there have been two GRIs in December, resulting in an increase from around $1,800/FEU compared to the beginning of the month. CMA CGM, MSC, and Hapag-Lloyd have revealed plans to further increase rates to $3,000/FEU in early January of 2024.

Cello Square activates a 24/7 Emergency Response System. Cello Square has activated a 24x7 emergency response system in response to this incident. We sense global logistics risks in real time, check the latest information on affected goods and expected routes/arrival dates, and provide guidance to customers.
We are preparing in advance for Change of Vessel(COD) and customs clearance/transportation at the destination with Hot Delivery. We are arranging alternative transportation means such as air, rail, and truck transportation. To minimize supply chain disruptions, we are reviewing transportation delay risks for each customer and considering early shipment in light of transportation delays.
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