Red Sea rerouteing adding to box shipping’s fuel and emissions costs

The need for container ships to avoid the Red Sea and Suez Canal and instead travel an additional 9,000 nautical miles around Africa’s southernmost point, the Cape of Good Hope, on Asia-Europe routes is pushing up costs.

Houthi missile and drone attacks on commercial shipping are now well into their fourth month, and the Iran-backed rebel militia group claims it will continue until a ceasefire is reached between Israel and Hamas and Israeli attacks in Palestinian territories stop.

Clarksons Research figures show a drop in container ship transits through the global shipping shortcut of the Suez Canal by more than 90% since early December 2023, as Houthi forces have taken aim at several dozen vessels, causing damage to multiple ships and claiming the lives of at least three seafarers while injuring several more. In response, Cape of Good Hope tonnage transits have risen by more than 80% over the same time period.

This nearly wholesale rerouteing of container vessels on the major trade route from Asia to Europe is adding significantly to the fuel bills and resultant emissions costs for container shipping companies, according to German maritime technology firm OceanScore.

OceanScore has estimated the route via the Cape of Good Hope has tripled bunker consumption due to the extra distance travelled and increases in sailing speeds of approximately 25% – from 16 to 20 knots, based on its AIS tracking of primarily container vessels – as box shipping lines seek to shorten the time it takes to travel the longer route around Africa.

The added miles and extra fuel being burned are, in addition to the cost of fuel, creating higher emissions and costing lines more for the carbon credits they require to do business in the European Union.

According to OceanScore, “The widescale diversion of marine traffic is fuelling the costs of shipping companies due to significantly higher exposure to the EU Emissions Trading System (EU ETS), which imposes liability for 50% of emissions for voyages to and from the EU and 100% for port calls and transits within the bloc”.

Modelling analysis conducted by the firm, on a base case of a 14,000-TEU container ship travelling around the Cape of Good Hope to the EU instead of through the Suez Canal, has shown the number of EU Allowances (EUA), or carbon credits, necessary to cover emissions would rise from 1,800 per voyage to 5,200 per voyage with the current 40% liability requirement.

Under the three-year phase-in of the EU ETS from 1 January 2024, the carbon offsetting requirements for vessels rise to 70% in 2025 and 100% in 2026.