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There is unlikely to be a quick shift from airfreight to ocean following the Israel-Hamas ceasefire that could also bring to an end a prolonged period of conflict on the Red Sea.
The conflict that began in the last quarter of 2023 forced shipping lines to reroute away from the Suez Canal and prompted additional interest in airfreight due to increased transit times and costs for ocean shipping.
Houthi rebels have now announced they will halt attacks on all non-Israeli vessels in the Red Sea.
But airfreight shippers need not worry about an immediate drop away in business as any return to the Red Sea and the Suez Canal will not be simple or quick because of safety considerations, said Xeneta's chief analyst Peter Sand.
It also depends on whether companies are prepared to transition from current routes, while there will also be congestion and supply chain delays when shippers do return, suggested the analyst.
Shippers will understandably be cautious about any return to the Suez Canal, not least because Israeli ships are excluded from the ceasefire deal.
Sand stressed that “an immediate large scale return is highly unlikely”, firstly because there is still much to be done before safe passage is assured and established and secondly because establishing viable alternative passage took much effort and shippers may be reluctant to switch back.
“Diversions around the Cape of Good Hope are not what the industry wants, but the situation is stable and being managed,” he said in a blog post on 20 January. “It took many months and extreme disruption to achieve this stability so carriers will be wary of heading back to the Red Sea too soon. If it goes wrong, they’re back to square one.”
There will be a chaotic period when ships do begin to return to the Red Sea.
“There will be severe disruption in the immediate period following a return of ships to the Red Sea," said Sand.
He added: “Ships will not be where they are supposed to be and will arrive at ports much earlier (or later) than scheduled. If large numbers of ships arrive at ports at the same time, it will cause massive delays and congestion that ripple across ocean supply chains.”
The transition period will likely see some ships continue to sail around the Cape of Good Hope, while others travel through the Red Sea. Carriers will likely approach a transition in a phased way by gradually increasing the size of vessels, predicts Xeneta.
“The complexity of ocean container shipping networks means it could take 1-2 months for schedules to transition to ‘normal’ operating conditions through the Red Sea,” said Sand.
That said, if capacity increases and rates decrease then a strong case for shippers to move from air to sea may emerge.
Risks will certainly persist for shipping in the Red Sea and Suez Canal, agreed Scan Global Logistics, with the situation for Israeli ships, and therefore any ships travelling nearby, remaining volatile.
“Vessels fully owned by Israeli companies or sailing under Israeli flags will still be subject to Houthi sanctions and, thereby, risk of attacks until all phases of the ceasefire have been implemented,” noted the company in a market update on 20 January.
The company further stated that It is too early to speculate on how the leading carriers will act.
Carriers, including Maersk and Hapag Lloyd according to Scan Global, are looking for certainty of safety before they consider shifting their operations back to the Suez Canal.
Safety is paramount for shippers, added Simon Heaney, senior manager, container research at Drewry. He pointed out that over 100 vessels have been attacked since November 2023 and “we should not expect to see container lines rush to return to the Suez Canal”.
Shipping companies will not want to compromise safety, plus major carriers are about to start phasing in new East-West networks as part of a big change in alliance structures so they will not want to risk changes that may disrupt operations.
“In Drewry’s view most carriers will wait to see how things develop and will need to be utterly convinced that the threat of attack has been eliminated before they consider a return to trans Suez transits. This timeline would take months rather than weeks,” said Heaney.
With attacks in the near past and many issues to iron out, it does appear that shipping companies are unlikely to make any swift decisions on routes and with good reason.
