Avoiding risk generates friction

According to a January 10 CNN report:

The US Navy shot down 21 Houthi missiles and drones launched from Yemen, according to a statement from US Central Command, in one of the largest Houthi attacks to take place in the Red Sea in recent months. The military called it a “complex attack” carried out by the Iranian-backed militants. It comes amid increasing tensions around Israel’s war against Hamas in Gaza and fears it could spill over into a wider regional conflict. The barrage, launched at about 9:15 p.m. Tuesday in Yemen, included 18 one-way attack drones, two anti-ship cruise missiles and one anti-ship ballistic missile, Central Command said. The attack was launched toward international shipping lanes in the southern Red Sea where “dozens” of merchant vessels were traveling, according to the statement. Two defense officials had earlier told CNN that the barrage included a total of 24 drones and missiles. (More and more)

Even before yesterday’s audacious attacks, increased risk had resulted in significant risk avoidance. Last week the Kiel Institute reported that about 200,000 containers per day have recently been transported via the Red Sea down from some 500,000 per day in November (see chart and infographic below). Further as the Bab al-Mandab Strait is converted from a beneficial bottleneck into a painful chokepoint, Loadstar reports:

Crowd-sourced freight rates platform Xeneta said the Red Sea shipping crisis would get worse before it got better, and shippers needed to “get their act together quickly” to secure capacity in the run-up to Chinese New Year next month.  In its latest analysis, Sea-Intelligence also warned that shippers exporting from Asia would have limited access to capacity in the coming weeks. “On Asia-North Europe, due to a combination of some services being held back in departure from Asia awaiting re-routing, and some services clearly arriving late into Asia, there is a rapid shortfall in the middle weeks of January, with a steep capacity drop expected for the week of 22 January,” explained Alan Murphy, Sea-Intelligence CEO. (More and more.)

There has been excess capacity in ocean shipping. Longer-duration sailings between East Asia and Europe are already starting to claim this capacity. But even as ships continue to go there is concern about other sources of friction emerging as many of the benefits of Suez are lost. For example, S&P Global reports:

Despite the fluidity seen from carriers to amend services, equipment shortages in the form of empty containers are expected in Asia as vessels are scheduled for longer transits on their regular loops due to rerouting around the Cape of Good Hope. According to data from S&P Global Commodities at Sea, the alternative route has increased westbound transit times for Asia-North Europe shipments by 30% and for Asia-West Mediterranean by 60%. As a result of increased fuel consumption and higher bunkering overheads, carriers have been raising charges. “Some carriers are better at managing containers than others, the lead time in getting back to Asia will be an issue as will berthing congestion, the supply chain shortages will cause some pinching to shippers,” a forwarder said. Disruptions in supply chain logistics can therefore be expected and will cause shortages in origin that will impact services. (More and more.)

In high volume, high velocity networks, a sudden slowdown in any high proportion channel will quickly result in various forms of congestion, often emerging in surprising ways and places. It is almost impossible to avoid the congestion and can be very difficult to decongest once it happens… especially if the overall network slowdown persists.

January 12 Update: The US and UK have taken military action against Houthi assets in Yemen. Reuters reports, “The strikes were carried out by aircraft, ship and submarine. A different U.S. official said more than a dozen locations were targeted and the strikes were intended to weaken the Houthis’ military capabilities, as opposed to being just symbolic. “We were going after very specific capability in very specific locations with precision munitions,” a U.S. military official said.” (More and more and more.)

January 16 Update: S&P Global reports, “More commercial shipping avoided transiting the Red Sea Jan. 15 as a Houthi missile hit a US-owned dry bulk carrier in the Gulf of Aden in the first retaliation since US-led forces struck Houthi military sites in Yemen over the weekend. The Gibraltar Eagle was struck by a Houthi anti-ship ballistic missile from Yemen at around 1300 GMT, the US Central Command said in a statement, adding that the ship reported no significant damage or injuries and was continuing its journey.”

January 24 Update: Reuters reports that Hapag-Lloyd is opening a “land-bridge” to try and end-run on the Bab al-Mandab Strait. Bloomberg has published a “Big Read” on the Red Sea crisis. I don’t see anything new or different, but it is a helpful overview with some more recent measures of continuing (growing?) constraints.

Reuters Graphics Reuters Graphics