Rising shipping costs could hit consumers as US-led coalition struggles to address Red Sea crisis

Wed 3 Jan 2024
Posted by: Phillip Adnett
Trade News

Suez Canal, leading to the Red Sea, with commercial vessels

Update (4 January): A joint statement by 12 nations, including the UK, US, Bahrain and Australia, has called the Houthi attacks on commerical as "illegal, unacceptable, and profoundly destabilising" and warned of unspecified "consequences" for the rebel group. Senior sources have told The Times that this was intended as a "final warning" before military action.

The ongoing attacks by Houthi rebels on international shipping has hit global supply chains, with experts warning of increased costs and delays.

The initial efforts of a US-led coalition appear to have had no early impact on reassuring shipping vessels, as one of the world’s largest shipping companies, Maersk, has said it will continue to avoid using the Suez Canal, instead choosing to re-route ships via the Horn of Africa.

The crisis began on 19 November, when Houthi rebels hijacked the car carrier Galaxy Leader. Since then, over two dozen attacks have been reported on commercial vessels.

Maersk’s early call

Since the Houthi attacks began, shippers have proved wary about returning to the Red Sea, despite initially resuming passage through the Suez canal after the announcement of the Prosperity Guardian taskforce, a taskforce currently comprised of at least ten nations, notably the US and UK.

Maersk was expected to make a decision today (3 January) on whether or not to resume shipping through the Red Sea. However, following an attack on one of its vessels in late December, the company announced early it would halt all Red Sea transits.

In an update to customers issued yesterday afternoon, Maersk said it had “made the decision to pause all transits through the Red Sea / Gulf of Aden until further notice”, citing the attack at the end of 2023.

Javier Blas, a commodities writer at Bloomberg, described the decision as “a major setback” for the US-led taskforce.


With many shippers choosing to reroute or pause shipments in order to protect their vessels, the additional costs caused by any disruptions could be passed onto consumers.

Already, research commissioned by the Institute of Export & International Trade (IOE&IT), found that a number of daily commodities have risen sharply as the crisis continues, including oats, sugar and coffee.

The analysis found that that the price of regular goods rose yesterday, with orange juice jumping by 4.20%, coffee by 1.86% and cocoa by 1.50%.

IOE&IT director general, Marco Forgione, said that the “impact of rerouting will be felt by consumers in the coming weeks, with the prices of many products rising imminently following weeks of delays in products arriving in the UK.

“We face an uncertain and potentially difficult period, with items including fruit, meats, seafood, grains, wine, tea, coffee, and clothing and key ingredients such as palm oil and energy costs all impacted by delays and knock on disruption to supply chains, which could take months to resolve.

“While it’s impossible to predict precisely how prices will rise over the coming weeks and months, it is inevitable that we will see the price of products on our shelves being impacted. Key indicators such as oil, wheat and rice have already increased by 5%.”

Forgione pointed out that major shippers, such as Maersk, MSC and Hapag-Lloyd, have already announced surcharges to cover the cost of rerouting the vessels.

Andy Bridges, a customs and trade expert at IOE&IT, explained that in general rerouting a ship could use an extra 3500 miles of fuel alone.

“Add to that the extra crew hours, the cost of insurance and the increase in cost of containers, then you are looking at a minimum of £2.3m per trip,” he added.


Bridges predicted a continued increase in costs in the foreseeable future, as shipping companies looked to cover their costs.

Paula Bellamy, managing director of Oceanwide Logistics UK, a freight-forwarder with extensive experience in the middle east, also said that she expected costs to continue to rise, but said that traders had various options available to them.

“The main advice we can give is to ensure that traders are fully aware of the routing for their goods cargo/containers so they can understand if the route is at risk of delay or diversion. There may be a sea/air route that avoid the area.

Another option, she says, would be for traders to make sure the carrier is clear on their routing comments, by book with carriers which are “clearly stating they are going around Africa. In that case you know it will have a much longer transit time but at least you know this is to avoid the affected area.”

“You can also book with services where the carrier is saying they are going through Suez – In these cases you might get a much faster transit time but it is not a certainty. You might also get a service which ends up taking much longer than a round-Africa service.”

Military escort situation

Maersk’s decision to pause transport came after a pair of attacks on a single vessel travelling through the Red Sea.

On 31 December, the Hangzhou issued a pair of distress calls: the first after being struck by a missile, the second after being attacked by four small boats.

According to the US Central Command, US Naval forces engaged and destroyed three of the four attackers, with assistance from onboard security.

Sal Mercogliano, a maritime historian at Campbell University and commenter on merchant shipping matters, said that the sending of the distress call suggested there was no military escort accompanying the vessel at the time.

“It appears that the Maersk ships that are going through the area, along with other major container liners that are going through, are not being directly escorted, as was the case with the US-flagged vessels and this means that the US Navy and other navies in the area – the British, the French and other allied forces of operation Prosperity Guardian – have to respond.”

Watching and waiting

Other shippers have either remained silent or are said to be assessing the situation.

MSC, an alliance partner of Maersk, has not provided an update since one of its own vessels was attacked at the end of last year.

In a brief statement, MSC confirmed that its vessel, United VIII, was attacked in the Red Sea on 26 December 2023 when transiting from King Abdullah Port, Saudi Arabia to Karachi, Pakistan. There were no reported casualties.

Shipper Hapag-Lloyd will reportedly reassess whether to use the passage on 9 January.

Its latest tracker shows almost all ships bound for the Suez Canal have been rerouted for the Cape of Good Hope, with additional traffic being moved from the Panama Canal was the backlog there continues.

French carrier CMA rerouted vessels passing through the Red Sea in a notice issued 19 December, saying it was “deeply concerned” about the situation.

However, some ships are making the journey without military involvement.

On Twitter/X, Mercogliano noted that a number of vessels had transited through the passage, with the Kilimanjaro – owned by the Chinese state COSCO Shipping company – making the journey through the Red Sea while many US-flagged ships waited for military escorts.

A spokesman for the Houthi rebel group, Yahya Sare'e, has previously stated that the purpose of the strikes is to support the efforts of Hamas against the Israeli army in the Gaza Strip, although many of the ships have no clear tie to Israel.

Iranian developments

The Prosperity Guardian taskforce is currently engaged in protecting commercial shipping in the region from the strikes.

Although the coalition is likely to attempt to mirror previous escort operations, it currently lacks the same level of support as Combined Task Force 151, a predecessor effort to tackle Somali piracy around the Gulf of Aden.

As noted by Defense and Security Monitor, many of the 10 nations are not active participants, with countries like Norway and the Netherlands sending small contingent of officers and other maritime partners, such as Egypt, South Korea and Turkey, choosing not to participate.

In addition, several nations have opted not to join the mission and instead escort their own ships through the passage.

‘Direct’ action

In spite of these difficulties, top officials say they remain committed to protecting shipping.

UK defence secretary Grant Shapps wrote in the Telegraph that the UK is “willing to take direct action, and we won’t hesitate to take further action to deter threats” in response to the shipping crisis.

His US counterpart, Lloyd J. Austin, told Shapps and Dutch minister of defence Kajsa Ollongren that the attacks represented a “a significant international problem that demands collective action.”

Senior military sources, including former CIA director David Petraeus, told The Times that a range of different options were being considered, including direct action by special forces.

Iranian involvement

The Iranian military has reportedly sent a warship into the waters to patrol the seas.

According to Tansim News Agency, a destroyer controlled by the Iranian Islamic Revolutionary Guard Corps, the Alborz, entered the Red Sea on Monday.

Iran is widely regarded as being the main backer of the Houthi Rebel movement, and the presence of a possible ally of the rebels has caused some diplomatic concern.