Since November 2023, attacks on commercial vessels in the Red Sea and Gulf of Aden have pushed freight and insurance costs higher, with many carriers rerouting vessels around the Cape of Good Hope instead of using the Suez Canal.
According to the UK’s Department for Transport, around 85% of UK international freight by weight and 55% by value is transported by sea, meaning prolonged disruption to key shipping routes can have significant consequences for businesses and supply chains.
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“The instinct is to treat something like this as a temporary problem that will correct itself once the situation changes,” said Richard Gray, chief operations and commercial officer at Cleveland Containers, part of the Cleveland Group.
“But supply chains do not snap back overnight. When major global shipping routes are disrupted at this scale, the knock-on effects can run for months or years after the immediate cause is resolved.”
Higher costs and longer lead times
Avoiding the Suez Canal and rerouting around southern Africa adds an estimated seven to 10 days to shipping journeys and can increase voyage costs by around $1m per trip. Major carriers, including Maersk and ZIM, have also introduced emergency surcharges ranging from $500 to $1,500 per container.
The impact extends beyond higher transport costs. Longer transit times mean vessels remain in circulation for extended periods, reducing available capacity across global shipping networks.
Available shipping capacity was estimated to be down between 15% and 20% in the second quarter of 2024 as a result of extended voyages, creating port congestion, equipment shortages, and knock-on delays across supply chains. “Businesses often calculate the cost of disruption in terms of the direct shipping increase,” Gray said.
“What they tend to underestimate is what happens when the ripple reaches their own operation. A delayed shipment of materials can stall a project, push back a production run, or leave a client short. That’s where the commercial damage accumulates.”
A shift in sourcing strategy
Industry assessments suggest disruption in the region could continue through 2026, with shipping companies and insurers remaining cautious despite periods of reduced attacks.
Even if the geopolitical situation stabilises, the structural effects on global shipping will take time to unwind. For example, Port infrastructure that has absorbed months of rerouted traffic will not clear instantly.
Also, shipping schedules that have been reconfigured around the Cape of Good Hope will not revert to normal in weeks. No one knows how long it will take for the effects of Red Sea shipping disruptions to ease, or how long a return to normal operations could realistically take.
As a result, many businesses are focusing less on waiting for conditions to return to normal and more on building resilience into their operations.
Companies are increasingly diversifying supplier bases, exploring nearshoring opportunities and investing in digital tools that improve visibility across supply chains. Some are also reviewing inventory strategies to reduce their exposure to unexpected shipping delays.
“The businesses that will come out of this best are the ones that stopped waiting for things to normalise and started planning around the new reality,” stated Gray.
“That means reviewing lead times, reassessing supplier geography, and thinking seriously about how much stock they can absorb if a shipment is late.”
He added: “Resilience is not a theoretical exercise. It is about having enough flexibility in your operation that when something goes wrong upstream, you are not immediately at the mercy of it. The businesses that are navigating this period well are the ones that built that flexibility in before they needed it.”
