Maersk’s Red Sea withdrawal: A major setback for global shipping and supply chains?

In a major blow to global shipping, Danish container shipping company Maersk has announced that it will be ceasing operations on Red Sea routes as of December 15, 2023. The company has released a forecast indicating that it is unlikely to resume operations on these routes before the end of 2024. This decision comes after several attacks occurred further from the coast, forcing ships to take longer detours when transporting goods between Asia and Europe.

The increased risks have resulted in increased fuel costs, estimated to be 40% higher than December figures. Additionally, Maersk has had to rent an additional 125 thousand containers due to the increased delivery times. The impact of these decisions on global shipping routes and supply chains is significant.

Maersk is currently the second largest company in the world in terms of container transportation volumes, making its decision to stay off Red Sea routes even more significant. Similarly, German company Hapag Lloyd has also stated that it will not be returning to the Red Sea at this time.

The uncertainty surrounding the safety and efficiency of the Red Sea routes is likely to have a ripple effect on trade and commerce between Asia and Europe. It remains to be seen how other shipping companies will respond to these challenges and what solutions will be implemented to ensure the continuity of operations in this critical region.