Red Sea Shipping Myths: What Sellers Need to Know

The Red Sea is a big deal in the shipping world—it’s an essential channel for about 30% of the world’s container traffic. This significant water body is located between northeastern Africa and the Arabian Peninsula. Most cargo ships pass through this sea route, especially between Europe, Asia, and the Middle East, since the Red Sea connects the Mediterranean Sea (through the Suez Canal) to the Indian Ocean. It’s why Red Sea shipping affects global trade, geopolitics, maritime security, and other conditions immensely. 

There are many myths about Red Sea shipping. This is because the Red Sea is currently experiencing an unprecedented crisis, which has dramatically impacted the maritime trade routes that pass through the sea inlet.

Due to the current situation, there are many shipping delays globally, disruptions in supply chains, and a massive spike in transportation costs. Shipping costs are, in fact, five times higher for some routes, specifically the ones from Asia to Europe. 

Having said that, we’ll demystify some common myths about Red Sea shipping so you can understand the reality of the situation. Keep reading to familiarise yourself with the truth.

5 Myths About Red Sea Shipping

Here’s what people think about the problems surrounding Red Sea shipping and what they actually are:

• These disruptions will change global shipping routes forever (Myth)

What’s the truth behind this myth about Red Sea shipping? Although the current Red Sea disruptions may pressure and prompt companies to find alternative routes, they are unlikely to alter these global shipping routes permanently.

The Suez Canal is too important a route in global maritime trade to be compromised or eliminated. It’s the shortest link between Europe and Asia, which reduces much of the travel time and costs as compared to other paths, like moving around the Cape of Good Hope at Africa’s southern tip.

Plus, the Suez Canal facilitates the passage of nearly 12% of global trade. So, diverting for a long period from this route would have many economic implications. Companies would prefer this sea route once the security threats are reduced due to its efficiency in terms of time taken, distance, and fuel consumption.

• There’s no shipping taking place due to current security threats on the Red Sea region (Myth)

The actual truth behind this myth about Red Sea shipping: 

• Despite historical and recent piracy, specifically along the Red Sea and Horn of Africa, there had been incredible improvements in maritime security before the recent escalations.
• These advancements stem from the A-grade security measures taken, comprising international naval patrols and shipping firms employing the most effective management practices. The developments had significantly brought down piracy risks, making the Red Sea a secure route for carrying out global trade.
• Shipping carriers are still sailing through the waters of the Red Sea. Although nearly 50% of common carrier vessels (approximately 25% of global capacity) are currently diverting, they will perhaps divert or have already moved away from the Suez Canal route.

Having said that, regardless of all the challenges or disruptions that have affected the region many times in the past, the current sentiment is that the disruptions at present are not a permanent situation. Moreover, Red Sea shipping routes, like the ones around the Cape of Good Hope, are receiving increased demand.

• Just the Suez Canal route is harmed by the crisis (Myth)

It’s important to understand that while the Suez Canal may be one of the most crucial routes connecting Europe and Asia, it’s only one element of the Red Sea. 

The Red Sea has a vast network of many valuable shipping lanes and ports that are essential for economic activities and regional trade. Ports, including Ain Sokhna in Egypt, Jeddah in Saudi Arabia, and Port Sudan in Sudan, are also vital economic hubs. They handle many types of cargo and have a significant role in the Middle East and North Africa’s economic development and trade dynamics.

These other important shipping routes collectively increase the Red Sea’s strategic importance beyond the Suez Canal. 

• Only the major companies are affected by the situation on the Red Sea route. (Myth)

The truth behind this myth is that while numerous large-scale international companies may heavily use the Red Sea route, it is equally important for smaller and local operators.  

This is because small entities cater to niche markets and provide specialised services, influencing inter-regional trade and uplifting local economies. The presence of small companies compels the Red Sea maritime sector to extend various services and encourage competitive pricing, which benefits the economies of the bordering nations in return.

However, the current Red Sea crisis is excessively disrupting small shipping carriers. They are facing many challenges, including inflated operating expenses and delays owing to longer routes. These small players are more vulnerable, as they usually lack the resources and budgets that big companies have to switch to alternative routes.

• Global commodity prices are untouched by the crisis at the Red Sea. (Myth)

In all honesty, these Red Sea disruptions can majorly impact global commodity prices, especially in strategically important areas like the Suez Canal. The Red Sea is known for being the main route for transporting oil, natural gas, and several raw materials. A delay in rerouting the region’s shipping traffic can cause changes in the supply chain and create instability in commodity markets.

On the other hand, due to prolonged disruptions or blockages, you may face temporary shortages of supplies, spiking oil and other commodity prices worldwide. In this scenario, the energy markets are the most impacted by these ongoing attacks, as nearly 12% of all the oil trade via sea passes through the Red Sea, increasing oil and gas prices. Nonetheless, if there are any further escalations to the current situation, then other commodities, like dry bulk and minor metals, will also become vulnerable. 

Also, if vessels have to take longer alternative routes, the added costs and transport time can contribute to higher prices. Therefore, this shows that Red Sea disruptions go far beyond the immediate region, affecting global commodity markets, prices, and economic stability.

Conclusion 

The Red Sea shipping route is likely to continue facing challenges in the near future due to complex geopolitical issues. The Suez Canal, which normally helps boost the economy by connecting different continents, is now seeing an abrupt decline in the number of ships passing through each day because of the increased security risks and large shipping companies refraining from using the canal.

The shipping industry cannot ignore the fact that the region’s prosperity depends on these sea routes. The future of Red Sea shipping is at a crossroads. However, these shipping routes have been shaped by decades of maritime trade and are supported by a well-established global shipping infrastructure. Temporary difficulties do not necessarily mean that these long-standing and efficient shipping routes cannot be used anymore.

The Red Sea shipping route may be facing a great ordeal right now, but it was and still is a crucial part of the global shipping network. If the industry and region put considerable effort into overcoming the current obstacles, they may turn the tables and ensure continued prosperity enabled through this important trade route.