Red Sea shipping workarounds add costs and delays

Red Sea shipping workarounds add costs, delays for suppliers, retailers

/ 02:40 PM December 28, 2023

Red Sea shipping workarounds add costs, delays

Houthi military helicopter flies over the Galaxy Leader cargo ship in the Red Sea in this photo released Nov 20, 2023. Houthi Military Media/Handout via REUTERS/File photo

LOS ANGELES  – Toymaker Basic Fun’s team that oversees ocean shipments of Tonka trucks and Care Bears for Walmart and other retailers is racing to reroute cargo away from the Suez Canal following militant attacks on vessels in the Red Sea.

Suppliers for the likes of IKEA, Home Depot, Amazon and retailers around the world are doing the same as businesses grapple with the biggest shipping upheaval since the COVID-19 pandemic threw global supply chains into disarray, sources in the logistics industry said.


Florida-based Basic Fun usually ships all Europe-bound toys from its China factories via the Suez Canal, the quickest way to move goods between those geographies, CEO Jay Foreman said in a telephone interview from his Hong Kong office.


That trade route is used by roughly one-third of global container ship cargo, and re-directing ships around the southern tip of Africa is expected to cost up to $1 million extra in fuel for every round trip between Asia and Northern Europe.

Yemeni Houthis’ drone and missile attacks in the Red Sea to show their support for Palestinian Islamist group Hamas fighting Israel in Gaza have upended Basic Fun’s plans.

READ: Shipping giant CMA-CGM joins Maersk in Red Sea return

The company is now working through the holidays to send toys from China to ports in the UK and Rotterdam via the the longer route.

It is also diverting some goods bound for ports on the U.S. East Coast from the Suez Canal to the drought-choked Panama Canal, while switching others to the West Coast via the direct route across the Pacific Ocean.

“It’s just going to take longer and it’s going to cost more,” said Foreman, who added that rates for some China-UK freight have more than doubled to around $4,400 per container since the Israel-Hamas conflict began in October.


The Suez Canal situation remains fast changing, and shippers Maersk and CMA CGM are moving to resume voyages with military escorts through the Red Sea.

The biggest impact likely will come over the next six weeks, said Michael Aldwell, executive vice president of sea logistics for Switzerland’s Kuehne + Nagel

READ: More than 20 countries now part of US-led Red Sea coalition–Pentagon

“You can’t flick a switch” and reorganize global shipping, said Aldwell, who expects the diversions to cause a shortage of vessel space, strand empty containers needed for China exports in wrong places and send short-term transport price indexes sharply higher.

Scramble for space

As of Wednesday, nearly 20 percent of the global container fleet – or 364 hulking container vessels capable of carrying just over 2.5 million full-sized containers – had been set on a new course due to the Red Sea attacks, according to Kuehne + Nagel data.

Vessel owners already have begun rationing the less expensive, contract-rate space they reserve for customers, said Anders Schulze, head of the ocean business at digital freight forwarder Flexport.

For example, he said, a customer who delivers five containers a month versus the 10 promised in their contract may only get five containers at contract rates. The remainder would be subject to expensive spot market rates.

This has set off a scramble to reserve space ahead of the early February deadline to get goods out of China before factories there close for the extended Lunar New Year celebrations, logistics experts said.

“Every single booking (out of China) now needs to be reconfirmed. The dates could change, the routing may change,” said Alan Baer, CEO of OL USA, which handles freight shipments for clients. OL has contracts with ship owners and is part of the rush to secure spots on ships.

Small shippers are most at risk of being elbowed out.

Marco Castelli, who has an import/export business in Shanghai, has been trying to rebook three containers of Chinese-made machinery components bound for Italy after the shipments were cancelled due to the crisis.

“Transfer my situation to a large corporation and you get what’s going on,” he said.

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Foreman at Basic Fun, which plans to have about 40 containers on the water before the Lunar New Year, said the company’s contracts with customers don’t include a way to recover the extra expense. “The price is fixed. (Most suppliers) are going to have to eat those costs.”

TAGS: 'Red Sea attack', costs, delays, Shipping

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