Maersk Doesn’t See Red Sea Improvements ‘Anytime Soon’

Glenn Taylor
·4 min read

Maersk is advising customers to expect more of the same in the Red Sea for the remainder of the first half of 2024, with potential for the crisis to seep into the back half of the year.

The container shipping giant is telling shippers that the longer transit routes stemming from recurring Iranian-backed Houthi attacks in the Red Sea’s chokepoint, the Bab el-Mandeb Strait, could potentially last into the third quarter.

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“Unfortunately, we don’t see any change in the Red Sea happening anytime soon,” Charles van der Steene, regional president for Maersk North America, told CNBC. “Customers will need to make sure they have the longer overall transit time built into their supply chain.”

Major container shipping lines including Maersk, Mediterranean Shipping Company (MSC), Hapag-Lloyd and CMA CGM have opted out of trying to pass through the Suez Canal, instead having them voyage around southern Africa’s Cape of Good Hope.

In early January, Maersk said it would avoid the conflict-ridden waterway and the neighboring Gulf of Aden “for the foreseeable future” after an attack on one of its vessels, the Maersk Hangzhou. CMA CGM was the last of the major lines to officially cut off all services through the waterway at the start of the February.

The extended transits around Africa are delaying the arrival of the empty vessels going back to Asia to pick up more U.S. imports, with lead times extending by 10 to 14 days in most cases. On Thursday, Maersk said in its earnings call that the Red Sea disruption has impacted 36 percent of its total container volumes.

Hellmann exec: human customer service still “underrated” during disruptions

In a session at the Manifest 2024 supply chain and logistics conference earlier this month, Stefan Borggreve, chief digital officer of Hellmann Worldwide Logistics, pointed out three distinct areas where logistics providers must support shippers amid the extended Red Sea-related delays.

“First of all, what piece of my cargo was affected? Not just the containers, but on the SKU level, because they need to see exactly where their cargo is,” Borggreve said. “Of course, they then want to see what this means for their cargo. How does it now get into Europe, or wherever it needs to be, compared to what initially was planned? And then, the most important piece is, how do you then find solutions with your shippers without causing more disruptions in the supply chain?”

Borggreve said the last point was all about prioritizing human customer service, calling it “still a bit underrated” in assisting shippers throughout the disruptions.

“There’s a lot of data providers…but you cannot rely fully on the data,” Borggreve observed. “You can exploit it and it can be of assistance, but you still then need to have the humans that can provide solutions in order to keep the supply chains flowing. That is basically the biggest challenge.”

In a customer advisory shared Tuesday, freight forwarder OEC Group encouraging those who typically ship through the Suez Canal to contact insurance experts to better understand and minimize—or even negate—the risks upon traveling the new routes.

“As a result of these diversions away from the Red Sea, vessels will be traveling through pirate infested waters on both the West and East Coast of Africa, namely the Horn of Africa and the Gulf of Guinea,” OEC Group said in the advisory note. “Additionally, vessels traveling around the Cape of Good Hope will now endure rougher waters, very strong currents and much higher winds due to the convergence of both the Atlantic and Indian Oceans, creating optimal conditions for a cargo overboard incident.”

Maersk brings more capacity online

To facilitate continuous trade movements, van der Steene told CNBC that Maersk has added roughly 6 percent of extra container capacity to its schedule.

Maersk’s need to add vessel capacity comes as average vessel delays have gotten worse since mid-December, according to data from maritime advisory firm Sea-Intelligence.

The largest capacity contraction compared to planned deployment two months ago has been seen on the trans-Pacific trade, with the Asia-to-North America East Coast trade lane having 7.5 percent fewer ships. Similarly, 6.9 percent fewer vessels were available to traverse the Asia-to-North America trade lane.

The capacity impacts on the Asia-to-North Europe and Asia-Mediterranean trade lanes are less severe. John McCown, non-resident senior fellow at the Center for Maritime Strategy, observed last month that more vessels on those two trade lanes would be pulled from other routes.

According to Sea-Intelligence, Asia-to-North Europe routes saw a capacity contraction of 4.9 percent since December, while the Asia-to-Mediterranean trade lane had just 1.4 percent fewer ships.