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South Africa is slated to benefit economically from the challenges shipping conglomerates face in the Red Sea.

Amidst the tumult of the ongoing Red Sea crisis, a profound disruption to maritime trade routes, the global shipping industry finds itself at a critical juncture, compelled to seek alternative avenues for transportation. The menace of Houthi attacks, now menacing all traffic traversing the Red Sea, has prompted a reevaluation of traditional routes and a quest for safer passage.

Foremost among these alternatives is the redirection of vessels around the Cape of Good Hope, situated at the southern tip of Africa, circumventing the perilous waters of the Red Sea entirely. This strategic maneuver, while ensuring safer passage, entails an additional 3,500 nautical miles and an extended sailing duration of 10-12 days per voyage. However, despite these temporal and fiscal implications, rerouting via the Cape of Good Hope has become an imperative response to the escalating risks of the Red Sea route.

Evidencing this paradigm shift, prominent shipping conglomerates like Maersk have undertaken the redirection of all vessels destined for the Red Sea, opting instead for the circumnavigation of Africa. This adjustment is particularly pronounced for ships traversing between Asia, Europe, and the eastern seaboard of North America.

What does this seismic shift signify in practical terms?

The circumnavigation of Africa via the Cape of Good Hope introduces a considerable augmentation of both time and cost. The elongated voyage entails heightened fuel consumption and operational expenditures, estimated to incur an additional $30,000 to $35,000 per voyage for larger container vessels. Moreover, as the influx of ships rerouted via the Cape intensifies, apprehensions arise regarding potential bottlenecks and capacity limitations, particularly if the crisis persists unabated.

However, amidst these challenges, the surge in traffic around the Cape presents an opportunity for South Africa to rejuvenate its maritime economy. The provision of essential services such as bunkering and ship supplies to diverted vessels heralds a potential economic resurgence for the region.

Simultaneously, as the security landscape in the Red Sea region continues to evolve, shipping entities are conducting meticulous assessments to ascertain the necessity of Cape rerouting. Contingency plans are being formulated to address exigencies, reflecting a proactive approach to circumventing disruptions until the Red Sea crisis abates.

In parallel to maritime recalibrations, Chinese exporters are increasingly pivoting towards rail transportation via the China-Europe Railway Express (CRE), circumventing the tumultuous waters of the Red Sea. This intermodal alternative has witnessed a notable surge in volume, with inquiries doubling since the onset of Red Sea disturbances.

Despite its higher costs relative to sea freight, the CRE offers expedited transit times, with trains traversing from China to Europe in approximately 12 days—significantly shorter than traditional oceanic routes. However, challenges loom, particularly concerning geopolitical tensions and operational efficiency, underscoring the imperative for sustained governmental support.

Confronted with the scarcity of vessels for protracted voyages and apprehensions surrounding supply chain disruptions, cargo owners are increasingly turning to air freight as a viable alternative. Despite its exorbitant costs, air cargo ensures swift and secure transit, particularly for perishable or time-sensitive commodities.

Yet, the air cargo industry grapples with inherent limitations, with capacity constraints exacerbating soaring freight rates. Consequently, while air freight serves as a stopgap measure to mitigate disruptions, its feasibility remains contingent upon the nature and urgency of the cargo.

Amidst these multifaceted adaptations, the Red Sea crisis reverberates across global trade networks, instigating a reevaluation of established routes and fostering a climate of resilience and adaptability. As the Panama Canal contends with its own challenges precipitated by climate change-induced droughts, the imperative for innovative solutions to safeguard global trade becomes increasingly apparent.

In the face of these concurrent crises, the imperative for adaptive strategies becomes incontrovertible, underpinning a collective resolve to navigate the tempestuous waters of uncertainty and safeguard the vitality of global commerce.

This article was originally posted in Tomorrow’s Affairs.

While advocating for systemic change over 4 decades, Gordon Feller has been called upon to help leaders running some of the world’s major organizations: World Bank, UN, World Economic Forum, Lockheed, Apple, IBM, Ford, the national governments of Germany, Canada, US – to name a few. With 40 years in Silicon Valley, Feller’s 300+ published articles cover the full spectrum of energy/environment/technology issues, reporting from more than 40 countries. Obama/Biden appointee to Federal comm. on innovation; Global Fellow at The Smithsonian; Winner: Prime Minister Abe Fellowship, Japan.