The rerouting of vessels from the Red Sea is expected to boost demand for capacity, but too much capacity from the continued delivery of vessels will continue to pose risks to the shipping industry.
Sea-Intelligence gauged the potential impact of Africa rerouting in 2024 as liner networks have been reworked to use the Cape of Good Hope to avoid continuing attacks on commercial vessels in the Red Sea region.
"In 2023, global TEU*Miles were 860 billion. Since we are trying to gauge the impact of the Red Sea crisis versus a normal situation, moving the same amount of cargo globally in 2024, but with a diversion around COGH, would result in a demand of 994 billion TEU*Miles," the Danish maritime firm said.
It noted that this equates to an increase of 16%.
[Source: Sea-Intelligence]
"As we can see from Figure 1, the Europe-Indian Subcontinent trade is by far the most impacted," commented Alan Murphy, CEO of Sea-Intelligence.
He added that the trade between the Far East and North America is the "least impacted" overall, but this is because the impact is volume-weighted and of course
Meanwhile, the distances from the Far East to the US West Coast are not impacted, and neither is the distance from the Far East to the US East Coast via Panama.
"The 16% increase in global TEU*Miles, in turn, means that the need for capacity also increases by 16%," Murphy said.
The Sea-Intelligence chief noted that this can be accommodated by the carriers through two mechanisms.
"The first is by absorbing the current significant overcapacity, which will become worse as more capacity is delivered during 2024," he said.
The second, Murphy added, is by speeding up vessels to allow the same amount of vessel capacity to deliver more TEU*Miles per year.
"At present, both mechanisms are at play. It should be expected that during 2024, the continued injection of more capacity will likely be used to slow the existing vessels down somewhat," the chief of Sea Intelligence further said.