Is the Red Sea effect on container shipping being overblown?

No one disputes that the Red Sea crisis is massively diverting containerized goods around the Cape of Good Hope. But opinions widely diverge on how serious this is for global supply chains, consumers and economies.

On one end of the spectrum, there’s the view that the Houthi attacks will stoke inflation, cause major goods shortages and have a material effect on Western economies, while container lines, previously expected to sink under the weight of excessive newbuilding deliveries, will turn into cash machines.

On the other end of the spectrum, there’s the view of respected shipping consultancy Drewry, which laid out a far more sober scenario during a presentation on Tuesday.

“The market globally is so heavily oversupplied that it has ample cover for disruptions such as this,” maintained Simon Heaney, Drewry’s senior manager of container research.

“Yes, more ships are needed to maintain weekly service [due to longer voyages around the Cape]. But there is ample spare capacity from the idle fleet, from the newbuilds that are coming in thick and fast, and from existing tonnage in other oversupplied trades that can be transferred across.

“While having too many ships is generally a bad thing for container lines, in this case, it is providing quite a lot more resilience to cope with disruptive events,” he said.

“Clearly, you can’t just pick up ships and move them where you want to. It will take time to reposition ships, so the pinch is going to be the worst in this initial stage. But we think things will ease once Red Sea diversions become part of the longer-term planning by carriers.”