Rerouting brings risks and environmental challenges
Attacks against shipping in Middle East waters have also severely impacted Suez Canal transits – down by more than 40% at the beginning of 2024 – and trade.

Coming so soon after the ongoing disruption caused by drought in the Panama Canal, this amounts to a double strike on shipping, causing yet more issues for global supply chains.

Whichever alternative routes vessels take, they face lengthy diversions and increased costs, also impacting their customers. Avoiding the Suez Canal adds at least 3,000 nautical miles (over 5,500km) and 10 days sailing time, rerouting via the Cape of Good Hope.

“Both routes are critical for the transport of manufactured goods and energy between Asia, Europe, and the US East Coast. Whichever route vessels take, they face lengthy diversions and increased costs. And let’s not forget, prior to these situations, the war in Ukraine had already prompted many shipping companies and cargo interests to seek alternative routes”, said Chopra.

The rerouting of vessels via the Cape of Good Hope has had a knock-on effect on global supply chains. Businesses that source goods and components from factories in China and South-East Asia have faced delays and higher costs from longer transit times.

As of April 2024, shipping volume around the Cape of Good Hope had soared by 193% compared to the volume usually registered in the pre-conflict period, according to Allianz Trade.

Rerouting also impacts the risk landscape and the environment. Storms and rough seas can be more challenging for smaller vessels used to sailing coastal waters, while infrastructure to support an incident involving the largest vessels, such as a suitable port of refuge or a sophisticated salvage operation may not be available.

Environmental gains may be lost as rerouted vessels increase speeds to cover longer distances. Red Sea diversions are already cited as being a primary contributor to a 14% surge in emissions in the EU shipping sector this year.

Green shipping challenges
Shipping contributes around 3% of global emissions caused by human activities and the industry is committed to tough targets to cut these. Reaching these targets will require a mix of strategies, including measures to improve energy efficiency, the adoption of alternative fuels, innovative ship design and methods of propulsion.

Decarbonization presents various challenges for an industry juggling new technologies alongside existing ways of working. For example, the industry will need to develop infrastructure to support vessels using alternative fuels, such as bunkering and maintenance, while at the same time phasing out fossil fuels. There are also potential safety issues with terminal operators and vessels’ crew handling alternative fuels that can be toxic or highly explosive.

“Increasing shipyard capacity will also be key as the demand for green ships accelerates. Such capacity is currently constrained with long waiting times and high building prices,” says Heinrich. Over 3,500 ships must be built or refitted annually until 2050, yet the number of shipyards more than halved between 2007 and 2022. “Capacity constraints on shipyards could have a knock-on effect for repairs and maintenance, with damaged vessels or those with machinery issues potentially facing long delays.” Machinery damage or failure is the most frequent cause of shipping incidents, accounting for over half of these globally in 2023 (1,587).

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