The major shipping companies are avoiding the Suez Canal and the logistics sector is preparing for a rise in costs

When, in the future, someone attempts to review what transpired in the logistics sector during these initial years of the 2020s, they will undoubtedly be surprised by the instability and unpredictability to which it was subjected. With a brief overview, we encounter the impact on logistics activities during the outbreak of the pandemic, strikes at major Chinese ports which created massive bottlenecks, the outbreak of war in Ukraine, and the curious/catastrophic case of the Ever Given blockage…

And, of course, among the major players of this era are the world’s largest shipping companies—those that, container by container, keep the pulse of the international trade system flowing. Now, these giants of freight and pallets are inevitably facing another complex situation that will certainly impact their delivery times and, of course, their costs.

Amid the crossfire of opposing powers in the war in Iran, the major commercial shipping companies have taken the most responsible decision and have begun to avoid transiting the vital Suez Canal on their routes from Asia to Europe. Thus, Maersk, MSC, and CMA CGM are once again utilizing the Cape of Good Hope route, circumnavigating the African continent to protect their crews, vessels, and cargo from missile impacts.

What is noteworthy is that, only very recently (just weeks ago), some of these companies had resumed transit through Suez, following a lengthy period during which they had opted to circumvent the African continent after attacks and the manifest insecurity throughout the southern region of the Red Sea. As a result, freight costs will rise once more, and delivery times will again be extended, in the midst of an uncertain situation that, according to the President of the United States, we cannot even begin to estimate how long it will last.

And what are the actual costs involved? It is challenging to say with certainty, but when detours around the Cape of Good Hope began in 2024, it was estimated that this diversion could cost as much as an additional $1 million (more than 900,000 euros) in fuel for each trip between Asia and Northern Europe. Furthermore, transit times between Asia and Europe or America increased from 10 to more than 14 days. Additionally, some of these shipping lines, such as Hapag-Lloyd, are applying substantial surcharges to shipments departing from or arriving in Gulf countries. Along those lines, the French company CMA CGM has announced an emergency conflict surcharge of $2,000 per 20-foot dry container.

On another note, this renewed avoidance of Suez comes with certain consequences that were not present in the situation of a few months ago, which was motivated purely by security concerns. At present, with the critical Strait of Hormuz also compromised and in light of successive cross-attacks on facilities related to the production and distribution of energy, gas, and oil, it is evident (in fact, it is already happening) that fuel costs are set to increase, which will undoubtedly further impact the logistics operations of these massive vessels that consume fuel on an unimaginable scale.

We are approaching weeks, possibly months, of widespread cost increases that will inevitably be reflected in the prices of raw materials and goods in general. This presents a new challenge for all logistics companies and for those in eCommerce, which we will report on as new developments arise.

Image: Gemini