Maersk warns of major disruption as it diverts ships away from Red Sea

Maersk reroutes all container vessels via Cape of Good Hope due to Red Sea disruptions. Hapag Lloyd reports significant costs for ship diversions.

Maersk is diverting all container vessels from Red Sea routes around Africa's Cape of Good Hope for the foreseeable future, warning customers to prepare for significant disruption, while Hapag Lloyd tallied a big increase in costs of diverting ships.

Shippers across the world are switching away from the Red Sea - and so the shortest route from Asia to Europe via the Suez Canal - after Iranian-backed Houthi militants in Yemen stepped up attacks on vessels in the Gulf region to show their support for Palestinian Islamist group Hamas fighting Israel in Gaza.

The trip round Africa can add about 10 days to journey times and requires more fuel and crew-time, jacking up shipping costs.

Denmark's Maersk (MAERSKb.CO) had said earlier this week it would pause all vessels bound for the Red Sea following an attack on one of its ships by Houthi militants, and has since begun redirecting ships around Africa.

"The situation is constantly evolving and remains highly volatile, and all available intelligence at hand confirms that the security risk continues to be at a significantly elevated level," Maersk said in a statement on Friday.

Houthi militants attacked one of Maersk's container vessels in the Red Sea on Jan. 1, with assailants trying to board ship. India is providing protective escorts to Indian container ships in the high seas around the Red Sea.

Hapag Lloyd (HLAG.DE) incurred costs in a two-digit million euro range between Dec. 18 and Dec. 31 after diverting 25 ships, a company spokesperson told Reuters on Friday.

Journeys have been delayed by between one and three weeks, depending on the area, the spokesperson said.

HIGHER COSTS
The Suez Canal is used by roughly one-third of global container ship cargo and re-directing ships around the southern tip of Africa is expected to cost up to $1 million extra in fuel for every round trip between Asia and Northern Europe.

The disruption has, however, been positive for shipping companies' stocks, which have been the best performers in Europe since the start of 2024, as investors bet on the boost in freight rates reviving the sector's fortunes.

But higher costs have also stirred worries about a resurgence in inflation, particularly in the euro zone.

Goldman Sachs on Friday raised its forecast for May euro-area core inflation to 2.3%, from 2.2%, as a result of the jump in shipping costs, and said a prolonged re-routing of cargo away from the Red Sea would likely have a bigger inflation effect.

"Our equity analysts expect that the shock will be neither as bad nor as prolonged as 2020-22 due to increased ship supply, and no port congestion due to lockdowns," Goldman Sachs said, making comparisons with the pandemic era.

The United States on Dec. 19 launched a multinational operation to try to safeguard commerce in the Red Sea, but many shipping companies and cargo owners are still diverting vessels around Africa due to continued attacks.

On Thursday, Maersk re-routed four out of five southbound container vessels that had already passed through the Suez Canal back north for the long journey around Africa.

"While we continue to hope for a sustainable resolution in the near future and do all we can to contribute towards it, we do encourage customers to prepare for complications in the area to persist and for there to be significant disruption to the global network," Maersk said.

French shipping firm CMA CGM said on Friday it had not changed plans announced last month to gradually raise the number of vessels travelling through the Suez Canal.