The Red Sea Crisis
Impacts on global shipping and the case forinternational co-operation

Background Paper

The International Transport ForumThe International Transport Forum is an intergovernmental organisation with 66 member countries. It acts
as a think tank for transport policy and organises the Annual Summit of transport ministers. ITF is the only
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The ITF works for transport policies that improve peoples’ lives. Our mission is to foster a deeper
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The ITF organises global dialogue for better transport. We act as a platform for discussion and prenegotiation of policy issues across all transport modes. We analyse trends, share knowledge, and promoteexchange among transport decision makers and civil society. The ITF’s Annual Summit is the world’s largest
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The Members of the Forum are Albania, Armenia, Argentina, Australia, Austria, Azerbaijan, Belarus,
Belgium, Bosnia and Herzegovina, Brazil, Bulgaria, Cambodia, Canada, Chile, China (People’s Republic of),
Colombia, Costa Rica, Croatia, Czechia, Denmark, Estonia, Finland, France, Georgia, Germany, Greece,
Hungary, Iceland, India, Ireland, Israel, Italy, Japan, Kazakhstan, Korea, Latvia, Liechtenstein, Lithuania,
Luxembourg, Malta, Mexico, Republic of Moldova, Mongolia, Montenegro, Morocco, the Netherlands,
New Zealand, North Macedonia, Norway, Poland, Portugal, Romania, Russian Federation, Serbia,
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the United Kingdom, the United States, and Uzbekistan.
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This background paper was authored by Olaf Merk (ITF) with contributions from Antonella Teodoro (MDS
Transmodal) and input from Frank van Tongeren (OECD/TAD) and Catherine Macleod (OECD/ECO).
Any findings, interpretations and conclusions expressed herein are those of the author and do notnecessarily reflect the views of the International Transport Forum or the OECD. Neither the OECD nor the
ITF guarantee the accuracy of any data or other information contained in this publication and accept no
responsibility whatsoever for any consequence of their use.
Cite this work as: ITF (2024), “The Red Sea Crisis: Impacts on global shipping and the case for international
co-operation”, Background Paper, International Transport Forum, Paris.

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Table of contents
Commercial navigation in the Red Sea under attack........................................................................ 5
Naval and diplomatic responses.................................................................................................... 10
Declining transit numbers ............................................................................................................. 10
Shift to land routes ........................................................................................................................ 11
Short-term impacts of disrupted navigation in the Red Sea ........................................................... 12
Seafarers and damage to ships ..................................................................................................... 12
Transit time and reliability............................................................................................................. 12
Maritime connectivity and capacity shifts ..................................................................................... 14
Cost impacts of disrupted navigation in the Red Sea ..................................................................... 15
Costs for shipping companies........................................................................................................ 15
Costs for shippers .......................................................................................................................... 17
Costs to states ............................................................................................................................... 20
Costs to the environment.............................................................................................................. 20
Policy considerations.................................................................................................................... 22
References ................................................................................................................................... 24

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Figures
Figure 1. Number of ships transiting the Bab-el-Mandeb Strait, week 45 2023-week 9 2024 ......... 11
Figure 2. Global average delays per month for late vessel arrivals, 2018-24 .................................. 13
Figure 3. Container shipping schedule reliability, 2018-24............................................................. 13
Figure 4. Shifts in global container shipping capacity, 2023-24 ...................................................... 14
Figure 5. Daily bulk shipping rates (Baltic Dry Index), 2023-24 ....................................................... 17
Figure 6. Global container freight rates, 2016-24 .......................................................................... 18
Figure 7. Container freight rates on selected trade routes ............................................................ 19
Figure 8. Weekly Suez Canal toll fees by ship type, 2023-24 .......................................................... 20

TablesTable 1. Overview of Houthi attacks on commercial ships ............................................................... 6
Table 2. Nationality of flags, ownership and operation of the ships attacked ................................... 8
Table 3. Piracy incidents in the gulf of Somalia ................................................................................ 9
Table 4. Shipping cost increases due to Red Sea situation for median size container ships............. 17

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Commercial navigation in the
Red Sea under attack
The Red Sea – connected to the Suez Canal in the north and the Bab-el-Mandeb Strait in the south – forms
one of the main global maritime chokepoints (Figure 1). Approximately 14% of global maritime trade and
30% of global containerised trade transits through the Red Sea. Hence, blocking access to the Red Sea canhave significant impacts on global maritime trade.
Since mid-November 2023, Houthis stationed in Yemen have intensified attacks on commercial shipping,
substantially complicating navigation through the Red Sea. This background paper assesses the situation
with regards Red Sea navigation and the impacts on global maritime trade. Drawing lessons from similar
blockades in the past it concludes with a brief set of policy considerations.
Between mid-November 2023 and 18 March 2024, a total of 45 Houthi attacks specifically targetedcommercial ships in the Red Sea and the Gulf of Aden, according to the ITF’s database (see Table 1). These
data are based on a combination of several public sources, including CENTCOM, Haaretz and Lloyd’s List.
The ITF database only takes account of attacks that specifically target commercial ships. Therefore, it does
not cover attacks on fishing vessels, navy vessels or non-targeted attacks. It also excludes interactions
between Houthis and commercial ships that cannot be considered attacks – that is, the exercise of (orattempt to exercise) violence with the intent to harm a commercial vessel.
As a result, the number of attacks on commercial ships listed in Table 1 is somewhat lower than numbersthat have been circulated in the media. Around one-third of the specific attacks on commercial ships listed
in Table 1 were on container vessels, with 31% on tankers and 24% on bulk carriers, reflecting thepredominance of these ship types in the regular Red Sea transits. A further 12% of attacks were on othership types.
Most of these attacks were carried out using drones, missiles or a combination of both. There were fourattacks during which assailants attempted to board the ship, either by skiffs or small boats, and in one caseby helicopter. In this last case, Houthis managed to hijack the vessel (the Galaxy Leader) and its crew. In
another attack that did not specifically target a vessel, a one-way unmanned surface vessel, a drone boat,
was used (Raanan, 2024). In most of the attacks the ship was hit by a missile. The ships that were hit inmany cases suffered only minor damages and no injuries.

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Table 1. Overview of Houthi attacks on commercial ships

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Date

Vessel name

Vessel typeType of attack

Impact14/03/2024

Pacific 01

Crude oil tanker

MissileNo impact, no damage/injuries

11/03/2024

Pinocchio

Containership

MissileExplosion near ship, no injuries

08/03/2024

Propel Fortune

Bulk carrier

MissileExplosions near ship, no injuries

06/03/2024

True Confidence

Bulk carrier

MissileThree crew killed; several others
seriously injured; vessel abandoned

04/03/2024

MSC Sky II

Containership

MissileOne hit, small fire; no injuries

24/02/2024

Torm Thor

Oil & chemical
tankerMissileImpact in water; no damage/injuries

22/02/2024

IslanderGeneral cargo
ship

MissileFire onboard, minor damage; no injuries

19/02/2024

Navis Fortuna

Bulk carrier

Drone

Superficial damage; no injuries

19/02/2024

Sea Champion

Bulk carrier

Missile/drone

Minor damage; no injuries

18/02/2024

Rubymar

General cargo
ship

MissileCrew evacuated; vessel sunk two weeks
after attack

16/02/2024

Pollux

Crude oil tanker

MissileNo injuries

15/02/2024

Lycavitos

Bulk carrier

MissileVery minor damage, no injuries

12/02/2024

Star Iris

Container ship

MissileMinor damage

06/02/2024

Morning Tide

Cargo ship

Missile/drone

Minor damage

06/02/2024

Star Nasia

Bulk carrier

Missile/otherprojectile

Minor damage

02/02/2024

Daffodil

Product tanker

Drone

Missed01/02/2024

Koi

Container ship

MissileHit water; no damage/injuries

26/01/2024

Marlin Luanda

TankerMissileMajor fire, damage

24/01/2024

Maersk Detroit

Container ship

MissileNo impact on vessel; no injuries/damage

24/01/2024

Tomahawk

Bulk carrier

Drone

Missed18/01/2024

Chem Ranger

TankerMissileHit water near the ship

17/01/2024

Genco Picardy

Bulk carrier

MissileSome damage

16/01/2024

Zografia

Bulk carrier

MissileHit; ship seaworthy, no injuries

15/01/2024

Gibraltar Eagle

Container ship

MissileHit, no injuries or significant damage

12/01/2024

Khalissa

TankerMissileNear miss

03/01/2024

CMA CGM Tage

Container ship

Missile/drone

No hit31/12/2023

Maersk Hangzhou

Container ship

Missile and boats

Hit, ship seaworthy, no injuries

26/12/2023

MSC United VIII

Container ship

MissileNo injuries

23/12/2023

Blaamanen

TankerDrone

Near miss

23/12/2023

Saibaba

TankerDrone

Hit, no injuries

23/12/2023

Chem Pluto

Tanker

Drone

Fire on board

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18/12/2023

Swan Atlantic

TankerMissile/drone

Impact on vessel

18/12/2023

MSC Clara

Container ship

Missile/drone

Near miss

15/12/2023

Hapag Lloyd Al Jasrah

Container ship

Missile/drone

Impact, fire

15/12/2023

MSC Palatium III

Container ship

MissileImpact, fire

14/12/2023

Maersk Gibraltar

Container ship

MissileHailed

13/12/2023

Ardmore Encounter

Tanker

UAV and skiffs

No injuries or damage

11/12/2023

StrindaTankerMissileFire, no casualties

10/12/2023

Centaurus Leader

Vehicle carrier

Drone

Misses03/12/2023

Unity Explorer

Bulk carrier

Missile/drone

Hit, minor damage

03/12/2023

Number 9

Container ship

MissileDamage, no casualties

03/12/2023

AOM Sophie II

Bulk carrier

MissileNo significant damage

26/11/2023

Central Park

TankerMissile andboarding

25/11/2023

CMA CGM Symi

Container ship

Drone

Minor damage

19/11/2023

Galaxy Leader

Vehicle carrier

HijackVessel and crew hijacked

Notes: UAV: Unmanned aerial vehicle.
Sources: CENTCOM, Haaretz, Lloyd’s List.

Four phases can so far be distinguished with regards to the attacks on commercial vessels. In the firstphase, from mid-November to mid-December 2023, almost all the ships attacked had some link with Israel,mostly via the beneficial ownership of the ship. In the second phase, from mid-December 2023 to midJanuary 2024, there was no clear pattern with regards links to any nationality. In the third phase, from
mid-January to mid-February 2024, most commercial ships attacked had a link with the United States or
the United Kingdom, essentially related to ownership and operation.
The fourth and current phase, which began in mid-February 2024, is again characterised by the lack of aclear pattern. This becomes clear from an analysis of the nationality of ownership, operation, management
and flags of the ships attacked, as far as it can be deduced from publicly available data (see Table 2). Whenavailable, the ITF database provides the nationality of the beneficial owner of the ship, rather than theplace where the ship or shipping company is operated.

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Table 2. Nationality of flags, ownership and operation of the ships attacked

8

Date

Vessel nameFlag

Ownership

14/03/2024

Pacific 01

PanamaVietnam

11/03/2024

Pinocchio

Liberia

Singapore

08/03/2024

Propel Fortune

Singapore

06/03/2024

True Confidence

Barbados

04/03/2024

MSC Sky II

Liberia

24/02/2024

Torm Thor

United States

22/02/2024

IslanderPalau

19/02/2024

Navis Fortuna

Marshall Islands

19/02/2024

Sea Champion

Greece18/02/2024

Rubymar

Belize16/02/2024

PolluxPanama15/02/2024

Lycavitos

Barbados

12/02/2024

Star Iris

Marshall Islands

Greece/United States

06/02/2024

Morning Tide

Barbados

United Kingdom

06/02/2024

Star Nasia

Marshall Islands

Greece/United States

02/02/2024

DaffodilSaudi Arabia

01/02/2024

Koi

Liberia

26/01/2024

Marlin Luanda

Marshall Islands

Bermuda24/01/2024

Maersk Detroit

United States

United States

United States

24/01/2024

Tomahawk

Liberia

18/01/2024

Chem Ranger

Marshall Islands

United States

Greece17/01/2024

Genco Picardy

Marshall Islands

United States

United States

16/01/2024

Zografia

Malta

Greece15/01/2024

Gibraltar Eagle

Marshall Islands

United States

12/01/2024

Khalissa

PanamaRussia03/01/2024

CMA CGM Tage

Malta

31/12/2023

Maersk Hangzhou

Singapore

26/12/2023

MSC United VII

Liberia

23/12/2023

Blaamanen

NorwayNorway23/12/2023

Saibaba

Gabon

India

23/12/2023

Chem Pluto

LiberiaJapan

18/12/2023

Swan Atlantic

Cayman Islands

NorwayLiberia

Operation

GreeceRomania

GreeceLebanonUnited Kingdom

United States

NorwayTHE RED SEA CRISIS: IMPACTS ON GLOBAL SHIPPING AND THE CASE FOR INTERNATIONAL CO-OPERATION © OECD/ITF 2024

18/12/2023

MSC Clara

Panama15/12/2023

Hapag Lloyd Al Jasrah

Liberia

15/12/2023

MSC Palatium III

Liberia

14/12/2023

Maersk Gibraltar

Hong Kong

13/12/2023

Ardmore Encounter

Marshall Islands

11/12/2023

StrindaNorway10/12/2023

Centaurus Leader

Singapore

03/12/2023

Unity Explorer

BahamasUnited Kingdom/Israel

United Kingdom

03/12/2023

Number 9

PanamaBermuda/ United
Kingdom

Bermuda/ United
Kingdom

03/12/2023

AOM Sophie II

PanamaJapan

26/11/2023

Central Park

Liberia

Israel25/11/2023

CMA CGM Symi

Malta

19/11/2023

Galaxy Leader

BahamasNorwayIsraelSources: CENTCOM, Haaretz, Lloyd’s List.

Attacks by Houthis on commercial shipping are not new. Between 2016 and 2022, there were 14 attacks
on commercial shipping along the coast of Yemen, five of which related to the Houthis (Diakun, 2023).
Some of these attacks were aimed at Israeli-linked ships. In parallel with the attacks from Yemen, piracy
operations along the coast of Somalia have also increased in recent months (see Table 3), adding to theinsecurity in the region.
Table 3. Piracy incidents in the gulf of Somalia
Date

Vessel name

Vessel type

Flag

Incident type

Description

29/01/2024

Panta Rei

TankerPanamaUnconfirmed

Suspicious approach

28/01/2024

MSC Clementina

Containership

Liberia

Unconfirmed

Suspicious approach

27/01/2024

WalmeaBulk carrier

Liberia

Confirmed attemptedpiracyAttempted boarding

04/01/2024

Lila Norfolk

Bulk carrier

Liberia

Confirmed piracy

Boarded by pirates, liberated byIndian navy

14/12/2023

Ruen

Bulk carrier

Malta

Confirmed piracy

Boarded by pirates, still in Somalia

26/11/2023

Central Park

TankerLiberia

Confirmed piracy

Boarded by pirates, liberated by USforces

Source: Bush et al. (2024).

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Naval and diplomatic responses
On 18 December 2023, the United States announced Operation Prosperity Guardian, which consists of thecreation of a naval task force with a group of countries to stop Houthi attacks on ships in the Red Sea. The
taskforce works under the Combined Maritime Forces, an existing counterpiracy operation based in
Bahrain. Countries that form part of Operation Prosperity Guardian include Australia, Bahrain, Canada,
Denmark, Greece, Netherlands, New Zealand, Norway, Singapore, Sri Lanka the United Kingdom and theUnited States, supported by the Seychelles.
Under the umbrella of Operation Prosperity Guardian, several actions to protect commercial shipping havebeen carried out. These include naval convoys to protect commercial shipping and the shooting down ofdrones and missiles aimed at ships. In addition, a series of air strikes was carried out against Houthi facilities
in Yemen in January, February and March 2024.
Complementary to Operation Prosperity Guardian, several countries have carried out naval actions toprotect their commercial fleets. For example, the French navy carries out convoy operations to escort
French-flagged ships or with French interests, such as the container carrier CMA CGM. These operations
take place in co-ordination with Operation Prosperity Guardian but are carried out under nationalcommand (Irish and Saul, 2024; Baker, 2024). Some Chinese shipping companies claim that they are
escorted through the Red Sea by the Chinese navy (Wright, 2024).
The European Union has since 19 February 2024 established a naval mission in the Red Sea, Aspides, toprotect commercial shipping from Houthi attacks, but without mandate to take part in strikes against
Houthis (EEAS, 2024). Naval action was also accompanied by diplomatic initiatives. In a press statementon 1 December 2023, the members of the United Nations Security Council condemned in the strongest
terms recent Houthi attacks against a commercial vessel in the Red Sea (UN Security Council, 2023).
On 10 January 2024, the Security Council condemned in the strongest terms the Houthi attacks oncommercial shipping in Resolution 2722 (UN Security Council 2024). The Houthi attacks againstcommercial shipping have also changed government perceptions of the group. On 17 January 2024, theUnited States redesignated Yemen’s Houthis as a global terrorist organisation, a measure that came into
effect on 16 February 2024 (The White House, 2024).

Declining transit numbers
Between 1 November 2023 and 28 February 2024, the number of ships transiting the Bab-el-Mandeb Strait
decreased by c 55%, but there are large differences by vessel type (Figure 1). The smallest decreases intransit numbers can be observed for bulk carriers (-12%) and crude oil tankers (-32%), bulk carriers (-45%)
and product tankers (-46%), whereas the largest declines take place in liquefied natural gas (LNG) carriers(-100%), liquefied petroleum gas (LPG) carriers (-88%) and container shipping (-75%).
The reduction of transits through the Bab-el-Mandeb Strait translates into a similar decrease of 55% intransits through the Suez Canal. There is a remarkable contrast between carriers: the Israeli carrier ZIM
decreased its Suez Canal transits by 100%, against only 33% for CMA CGM over the same period, according
to data from MDS Transmodal. Even CMA CGM has most recently decided to halt its Suez Canal transits.

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Figure 1. Number of ships transiting the Bab-el-Mandeb Strait, week 45 2023-week 9 2024

Source: Lloyd’s List.

The ships that avoid the Suez Canal have instead taken the maritime route around southern Africa (via theCape of Good Hope); the number of ships travelling via this route increased by 130% between the
beginning of November 2023 and the end of February 2024. Ultra-large container vessels in particularseem to take the Cape of Good Hope route instead of the Suez Canal route: the average size of thecontainer ships transiting through the Suez Canal has decreased for most top 10 container carriers.
At the same time, there is nothing new about container ships taking the route via southern Africa.
Circumnavigating Africa was the sole alternative in the Asia–Europe trades during the Suez Crisis of 1956;
the Six-Day war of 1967 and the Yom Kippur war of 1973 (Notteboom et al., 2024). In the recent past,
container carriers regularly re-routed their ships to put pressure on the Suez Canal authority to lower its
canal fees.

Shift to land routes
Some carriers have offered land transport options to serve regional markets usually accessed via the Red
Sea, to avoid the Bab-el-Mandeb Strait and the Houthi presence. Hapag Lloyd has offered a land-routing
to connect Saudi Arabia’s Red Sea hub Jeddah with ports in the north of Saudi Arabia (Dammam and Jubail),
as well as the Jebel Ali port in Dubai (Nightingale and Diakun, 2024).
Another option is the recently announced India–Middle East–Europe Corridor (IMEC). This project,introduced by Group of 20 (G20) leaders at their September 2023 summit in India, would shorten distancesby 40%. The concept involves a sea leg, connecting West India to the UAE; a railway line traversing Saudi
Arabia and Jordan to the Israeli ports; and a second maritime link to the southern European ports of
Piraeus, Genova and Marseilles (Notteboom et al., 2024).

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Short-term impacts of disrupted navigationin the Red Sea
Seafarers and damage to ships
The hijacked car carrier Galaxy Leader and its crew have not been released by the Houthis. The attack on
the True Confidence resulted in the death of at least three seafarers. As for the other commercial ships,
based on the public information available, no seafarers seem to have been injured due to the attacks. Yet,
the attacks add stress to a working environment that is already stressful and that came under hugepressure during the Covid-19 pandemic. Although research on seafarers’ mental health could be improved(Carrera-Arce et al., 2023), there are worrying trends for seafarers’ working conditions, in particular theincrease in the abandonment of seafarers without pay (ITF, 2023; ITF Seafarers, 2024).
Damage to most commercial ships due to the Houthi attacks has so far been limited, thanks tointerventions from naval forces stationed in the area. Various attacks have missed their targets, and when
missiles hit ships, the damage has often been minor, allowing the ship to continue on its course. Yet, there
have also been more serious incidents. The attack on the True Confidence resulted in the death of three
seafarers, very serious injuries to several others and the abandonment of the ship. The Rubymar sunk due
to damage from a Houthi attack.

Transit time and reliability
The attacks on navigation in the Red Sea have caused an increase in transit times. Taking the Cape of Good
Hope route instead of the Suez Canal route adds around 8 500 nautical miles to a round trip from the Far
East to Europe. Shipping companies could increase their speeds to make up for shipping delays, but there
are no indications that they have done so. In cases where container shipping companies continue sailingat the same average speed as in 2023 (around 15-16 knots), the diversion via southern Africa would add
around 10 days to the Far East-Europe voyage, meaning 20 days for a round trip.
As these additions to transit time were not planned for, they will show up as ship delays. The average
delays of container ships have worsened from 5.1 days in November 2023 to 6.0 days in January 2024
(Figure 2). It is difficult to predict whether delays related to diversions via the Cape of Good Hope route
will result in figures similar to the peak delays of eight days recorded in 2021. Container shipping
companies have recently updated their planned schedules, which means that longer transit times are now
planned for and will not necessarily show up as ship delays in future data.

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Figure 2. Global average delays per month for late vessel arrivals, 2018-24

Source: Sea Intelligence.

The situation in the Red Sea has also negatively impacted the reliability of ship schedules. The unplanned
re-routing of vessels via southern Africa also shows up in data on ship schedule reliability, which decreasedby ten percentage points, from 62% in November 2023 to 52% in January 2024. This means that 52% ofcontainer ships arrive at the pre-announced time in each port with a delay of less than one day. Schedulereliability is still far above the very low levels (around 30%) in 2021 (see Figure 3).
Figure 3. Container shipping schedule reliability, 2018-24

Source: Sea Intelligence.

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13

In 2021, the very low reliability implied equally low predictability on vessel arrivals for port terminal
operators, which contributed to sub-optimal berth planning, and thus contributing to port congestion.
Currently, no port congestion due to diversion of container ships via southern Africa has been reported.

Maritime connectivity and capacity shifts
Container shipping companies offer weekly services to their customers. With the shipping distanceincreased because of the re-routing via southern Africa, shipping companies would need to deploy 15
instead of 12 ships to be able to offer a weekly Far East-Europe service. In other words, they require more
ship capacity to be able to offer the same service level, if they do not change ship speed. The extra capacity
needed for the Far East-Europe services appears to be coming from the Pacific services (Asia to US West
Coast): the scheduled capacity for the first quarter of 2024 on Asia-Europe routes is 5% higher than for the
first quarter of 2023, and on Far East-America it is 16% lower (see Figure 4).
This shows that regional disturbances that disrupt one shipping route (Far East-Europe) quickly cascade toother shipping routes, since the main container shipping companies are global operators that can shift
their ship capacity from one to another shipping route, depending on the circumstances.
If the Red Sea disruption and the related re-routing via southern Africa continues, global shipping lines
might also restructure their shipping networks. For example, instead of relying on Eastern Mediterranean
ports as transhipment hubs (used to load cargo from one ship to another) they might rely more on ports
in the Western Mediterranean, as they would be better situated in a new constellation of trade routes via
southern Africa. As such, this might change the maritime connectivity of countries.
Figure 4. Shifts in global container shipping capacity, 2023-24

Source: MDS Transmodal.

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Cost impacts of disrupted navigationin the Red Sea
The continued Houthi attacks in the Red Sea, and the consequent naval and maritime responses, also
impose costs on shipping companies, shippers and states.

Costs for shipping companies
The situation in the Red Sea has increased costs for shipping companies: both those with ships that
continue to transit the Red Sea and Suez Canal, and those with ships that sail around the Cape of Good
Hope instead. When comparing costs in the current situation with those prior to the disruption in the Red
Sea, both scenarios (using the Suez Canal-route or using the Cape of Good Hope-route) need to beassessed. This assessment considers various cost components: fuel costs, crew costs, canal fees, insurance
costs, maritime security costs and other operating costs.
Fuel costs

When ships sail around southern Africa, they add around 10 sailing days if they sail at 15-16 knots, resulting
20 additional sailing days for the Far East-Europe roundtrip. This mean that they will consume substantiallymore ship fuel, in the order of 100 tonnes of fuel per day for a container ship with mean ship capacity(12 500 twenty-foot equivalent units, or TEU) loaded at 80%. For a ship with these characteristics, this will
result in USD 1 million in additional fuel costs for the extra 20 sailing days at similar speed. This represents
an increase in fuel costs of 33% for container ships on a Far East-Europe round trip.
Charter costs and container hire

Twenty additional days at sea also means an increase of 33% in charter costs, assumed at USD 50 000 per
day for a container ship with 12 500 TEU capacity. Charter costs include average manning costs(approximately USD 3 000 per day) and other operating costs, such as maintenance, insurance, stores,
spares, management and administration amounting to USD 5 500 per day (Drewry, 2022). In total, theadditional 20 days of an Asia-Europe round trip would result in additional charter costs in the order of USD
1 million. The longer round trip also requires 20 additional days of container hire, estimated at USD 3 per
day per 40-ft (FEU) container. Assuming the 12 500 TEU ship has a utilisation rate of 80% (a load factor of
80%) implies that it carries 10 000 TEUs or 5 000 40-ft containers (FEUs). Total additional costs forcontainer hire represent USD 300 000.
Canal fees

When ships do not transit the Suez Canal, they avoid paying canal fees. For a container ship with mean
ship capacity this amounts to around USD 300 000, or USD 600 000 for a round trip.
Insurance costs

A large part of the Red Sea has long been designated a “listed area” by the Joint War Committee of Lloyd’s
and London companies market insurers. This makes it possible to levy additional premiums above the basic

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annual rate for war risk cover. In practice, insurers used to waive additional premiums or levy these
additional premiums at a nominal 0.l% or 0.05%. The current tensions in the Red Sea have changed thissituation. In early January 2024, war-risk cover rates were generally around 0.3-0.35%. In mid-January
these rates increased to 1% of the hull value of a ship. This would represent an additional USD 1.3 million
on the cost of a single trip for a brand new very large crude carrier booked to load a consignment of crude
from a Saudi west-coast port (Osler, 2024). For a median capacity container ship, this could mean up to
USD 1 million.
However, in practice there are large differences in rates. Some ship owners get much better deals,
depending on no-claim bonuses and volume discounts. Owners of vessels perceived to have Israeli links
find it hard to buy cover at all, considering the Houthi targeting of Israel-linked ships (Osler, 2023). There
are reportedly indications that US and British owners have experienced similar difficulties since theairstrikes by UK and US forces on Yemen in mid-January 2024 (Osler, 2024).
Maritime security costs

The situation in the Red Sea has renewed the interest of ship owners in private armed guards. Deploymentof such guards contributed to deter boarding by Somali pirates in the 2010s but seems less appropriate
against the missile attacks of the Houthis. Nevertheless, it is reported that ship owners with ships at highrisk have increased the number of guards onboard from teams of 3 to teams of 6-8, and that ship owners
also take on such guards for longer periods than before. Deploying more armed guards can help reduce
the additional premiums imposed by insurers on war risk cover. The costs of a three-man team for one
month stand currently at around USD 30 000 (Bush, 2024).
Total costs for shipping companies

When these different cost components are added up, the additional costs for an Asia-Europe roundtrip by
a median sized container ship are up to USD 1 million if the ship continues to take the Suez Canal routeand USD 1.7 million if the ship takes the Cape of Good Hope route. This represents an additional cost per
40-ft equivalent unit (FEU) container into Europe of up to USD 160 via the Suez Canal or USD 272 via theCape of Good Hope (see Table 4).

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Table 4. Shipping cost increases due to Red Sea situation for median size container ships
Cost item

Via Suez Canal (USD)

Via Cape of Good Hope (USD)

Fuel costs

1 million

Charter costs

1 million

Container hire

0.3 million

Canal fees

–0.6 million

Insurance costs

Up to 1 million

Maritime security

0.03 million

Total additional costs per ship

Up to 1 million

1.7 million

Additional costs per 40-foot container

Up to 160

272

Notes: The data in this table assumes a load factor of 80%; therefore, a 12 500 TEU ship would carry 5 000 40foot equivalent units (FEUs). A total of 80% of the costs of the round trip are assigned to the westbound trip.
Sources: Personal communication with MDS Transmodal for calculation of Cape Good Hope scenario; Bush (2024);
Osler (2024); Drewry (2022) for data on Suez Canal scenario.

Costs for shippers
Shipping freight rates

Bulk shipping rates at the beginning of February 2023 are resemble those recorded at the beginning ofNovember 2023. A spike in December 2023 saw rates triple but they then quickly declined (see Figure 5).
Figure 5. Daily bulk shipping rates (Baltic Dry Index), 2023-24
4000
3500
3000
2500
2000
1500
1000
500
0

Source: Baltic Dry Index.

Global container shipping freight rates increased by around 130% between the beginning of November
2023 and the beginning of March 2024, reaching a peak of USD 3 964 per 40-ft container on the Drewry
Global Container Index by the end of January 2024. This represents a very significant increase in container
shipping freight rates, but freight levels remain well below the peak rates that were realised in 2021 –exceeding USD 10,000 - following the supply chain disruptions related to Covid-19 (see Figure 6).

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Figure 6. Global container freight rates, 2016-24

Source: Drewry.

The container freight rate for the Far-East Europe route increased by USD 1 872 (representing an increaseof 220%) between 1 December 2023 and the end of January 2024, while the rate for Far EastMediterranean route increased by USD 2 493 (or 198%), resulting in rates for transporting a 20ft containerof USD 2 723 between Far East and Europe, and USD 3 753 between the Far East and the Mediterranean,
according to the Shanghai Containerised Freight Index.
It is not only on these routes that rates have risen substantially. Rates for container transport between the
Far East and US West Coast stood at USD 5 005 on 2 February 2024, an increase of USD 3 359 (or 204%).
Rates for container transport between the Far East and US East Coast stood at USD 6 652, an increase of
USD 4 206 (or 172%). As Figure 7 shows, the rate increases on these Far East-US routes have accelerated
since mid-January 2024, in comparison with rates for Far East-Europe and Far East-Mediterranean routes,
which have slightly declined since that date. This could be related to the shift in ship capacity from Far
East-US routes to Far East-Europe routes that created more scarcity on the former and less scarcity on thelatter.
Container carriers have started to impose surcharges on the regular freight rates. For example, Maersk
has imposed a transit disruption surcharge (TDS) ranging from USD 200 to USD 450 per container on cargooriginating from Far East Asia. Additionally, a peak season surcharge of USD 300 to USD 2 000 per container
is applied for vessel sailing dates from 1 January 2024. For cargo from other regions, Maersk charges similarlevels of TDS and an emergency contingency surcharge ranging from USD 100 to USD 2 100 per container(Shen, 2024). Similar surcharges are imposed by other carriers. However, there is a lack of transparency interms of which cost increases are covered by freight rates and specific surcharges. Consequently, containertransport pricing has become increasingly opaque and hard to predict for shippers and logistics services
providers (Baker, 2024c).

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Figure 7. Container freight rates on selected trade routes

Freight rate (USD per container)

7 000
6 000
5 000
4 000
3 000
2 000
1 000
-

Shanghai-Europe USD/TEU

Shanghai-Mediterranean USD/TEU

Shanghai-US West Coast USD/FEU

Shanghai - US East Coast USD/FEU

Source: Shanghai Containerised Freight Index.

There is also a significant divergence between development of cost for shipping companies and freightrates. As indicated above, the cost increases of rerouting a median size container ship around the Cape ofGood Hope amount to around USD 300 per 40ft import container, whereas the container freight rates on
the Asia-Europe and Asia-North America routes have increased by around USD 1 800-4 200 per container.
Impacts on supply chains

Various manufacturing industries use sourcing models based on just-in-time management. Sudden
increases in shipping times and shipping delays make just-in-time management unfeasible. Related to this,several car manufacturers, including Tesla and Volvo Car, have temporarily stopped production. Tesla
suspended most car production at its factory near Berlin from 29 January to 11 February 2024, due to alack of components after ships were re-routed around the Cape of Good Hope. Volvo Car announced in
mid-January 2024 that it would pause production at its plant in Ghent, Belgium, for three days due to adelayed delivery of gearboxes (Waldersee et al., 2024).
The supply chain effects could be considerably larger in the long term if the conflict in the region escalates.
The Red Sea route secures the supply of energy materials including crude oil, gasoline, LNG, coal and coke
as well as metal products, both northbound and southbound. These products are used in the early stagesof global value chains, including in manufacturing. An increase in costs or delays in the supply of raw
materials could severely disrupt manufacturing supply chains. The rise in shipping costs could be passed
on to consumers and contribute to inflation. As seen during the Covid-19 pandemic and its immediate
aftermath, higher shipping charges will raise costs for traded goods. According to the OECD’s Economic
Outlook Interim Report for February 2024, a 100% increase in freight rates due to the Red Sea crisis, if
persistent, could raise annual OECD import price inflation by close to 5 percentage points, adding 0.4
percentage points to consumer price inflation after about a year (OECD, 2024).

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Costs to states
Costs of naval operations

The tensions in the Red Sea have resulted in more naval ship deployment in Red Sea. Naval ships active inthe region have been repositioned in or close to the Red Sea, while other countries, such as Denmark, havepromised to send naval ships to the regions. Estimates of the costs of naval protection operations are rare,
but existing sources suggest that these costs are substantial.
For example, an estimation of costs of naval protection against piracy in Somalia in the 2010s amounted
to USD 2 billion per year (Jones, 2014). While protection of freedom of navigation seems currently to beconsidered a public good, it should be noted that the most concerned parties – shipping companies –
hardly pay for this public service as they are practically exempt from taxation via mechanisms such as open
shipping registries and tonnage tax schemes. International shipping has also been excluded from
Suez Canal revenue loss

The decrease in vessel transits in the Red Sea also has an impact on Suez Canal toll revenue, an importantsource of state revenue and foreign currency for Egypt. Canal fee revenues have decreased by 40%, from
USD 47 million in late November 2023 to USD 28 million in the first week of January 2024. As Figure 8
shows, fee revenue notably dropped from container ships (-66%) and LPG carriers (-93%), while the canalfee revenue from bulk carriers only decreased by 7% (Rahman, 2024).
Figure 8. Weekly Suez Canal toll fees by ship type, 2023-24

Source: Veson Nautical.

Costs to the environment
The diversion of ships via southern Africa will increase greenhouse gas (GHG) emissions from shipping.
How much depends on choices that shipping companies make with respect to ship speed, changes in
networks and size of ships deployed. What is clear is that adding 8 500 nautical miles to the Far EastEurope round trip increases the fuel consumption by 33% (and hence GHG emissions) if speeds remain the
same.

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In cases where ship speed increases by 1%, fuel consumption (and therefore emissions) increases by 2.2%.
Therefore, for example, if the speed on Far East-Europe container services is 16 knots, an increase to 17
knots (a 6.3% speed increase) would mean a further increase in emissions of 14%. Further increases inemissions might take place if carriers decide to use smaller container ships for part of the voyage, forexample via transhipment of containers to feeder vessels in hub ports in the West Mediterranean (Baker,
2024b).
There will also be environmental impacts from ships sinking due to illegal attacks in the Gulf of Aden andthe Red Sea. The Rubymar sank two weeks after it was attacked, with the risk that thousands of tonnes offertiliser threaten to spill into the Red Sea, which could harm marine life, including coral reefs, and affectcoastal communities that rely on fishing for their livelihoods (The Guardian, 2024).

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Policy considerations
The current crisis in the Red Sea takes place in the context of geopolitical tensions, increased occurrenceof extreme weather events and the aftermath of the Covid-19 pandemic. Considering the high degree ofinterconnectedness of global freight transport systems, crises in one region quickly spread to other regionsin the world.
For example, to compensate for the additional shipping days caused by the rerouting via southern Africa,
shipping companies have shifted ship capacity from other trade routes to the Asia-Europe route. As aresult, freight rates have not only risen significantly on Asia-Europe routes, but also on other routes, such
as Asia-North America.
The increased occurrence of crises and interconnectedness of transport systems calls for increased global
co-ordination to ensure that freight transport systems continue to be a backbone of global supply chains.
There is limited international collaboration on shipping capacities. However, regulators’ interventions canhave domino effects on different jurisdictions. For example, the Chinese Ministry of Transport convoked
carriers to a meeting in September 2020, demanding they normalise pricing and deploy more capacity inthe trade routes to North America. In the wake of the discussion with Chinese regulators, several carriers
cancelled their announced general rate increases and shifted capacity from the Asia-Europe routes to thetrans-Pacific trade route. This resulted in reduced capacity on the Asia-Europe trade route and rapid
increases in freight rates on that route (ITF, 2022).
Considering this interconnectedness, international co‑operation between the relevant authorities should
be enhanced. There are some initiatives. The US Federal Maritime Commission, the Directorate-General
for Competition of the European Commission and the Chinese Ministry of Transportation meet once every
two years to discuss competition in the shipping sector. There should also be wider international
monitoring of competition in liner shipping. In fact, competition authorities in Australia, Canada, New
Zealand, the United Kingdom and the United States have established collaboration on monitoring
container shipping: a working group comprised of specialists from these countries will monitor shipowners
worldwide and share intelligence to identify behaviour that restricts or distorts competition (ITF, 2022).
Transparency with respect to surcharges could be increased if governments established lists of acceptedsurcharges. Surcharges would seem less arbitrary if they were applied to costs incurred, if their calculation
was transparent and if the carrier wore the burden of proof for the need (currently in many countries, it
falls on shippers to refute the need for charges). In addition, a surcharge assessment tool could beconsidered that could help transport users to assess the fairness of surcharges imposed by carriers.
While protection of freedom of navigation seems currently to be considered as a public good, the mostconcerned parties, shipping companies, hardly pay for this public service as they are practically exempt
from taxation via mechanisms such as open shipping registries, tonnage tax scheme and the exclusion ofinternational shipping from the OECD’s recent global minimum tax proposals (ITF, 2019). Increasing
geopolitical tensions with spillover effects raises the question of cost recovery of naval protection ofmaritime shipping.
Maritime connectivity in the context of the Red Sea crisis was discussed in an extraordinary Group of Seven(G7) Transport Ministerial Meeting that took place on 20 February 2024. The ministerial declaration

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released after the meeting strongly condemned the Houthi attacks and reiterated support for countries
that exercise the right to defend their vessels from attacks (G7 Italia, 2024). The declaration welcomed the
Aspides and Prosperity Guardian naval operations. It called for the Houthis to immediately cease their
attacks, and to release the Galaxy Leader and its crew, which they seized on 19 November 2023.
The ministerial declaration also contained a commitment to promote safety and security of seafarers andvessels as part of government-wide responses to the Red Sea situation. It underscored the benefits oftransparency for transport users on rate increases and to understand the drivers of cost and rate increases.
It highlighted the role that the G7 can play in global co-ordination of policies and measures that
accommodate smooth freight transport flows, including via the establishment of a G7 Working Group on
Transport Supply Chains.

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