Maersk CEO Vincent Clerc has said that the coming months will be challenging for carriers and businesses alike, as the Red Sea situation stretches into the third quarter of 2024, according to the company's release.
Speaking at a recent online event with customers, Vincent Clerc talked about the challenges the continuing attacks on ships in the Red Sea / Gulf of Aden have created for logistics and supply chains. For the time being, Maersk ships are continuing to divert around the Africa via the Cape of Good Hope in South Africa. He acknowledged the situation is difficult for both carriers and businesses needing their cargo transported.
Vincent Clerc talked about the ‘massive impacts’ of the Red Sea situation since it began in December 2023. Extending rotations to travel the longer route around Africa takes two to three ships, depending on the trade in question, he said. The availability of additional capacity was low to begin with and, across the industry, carriers’ ability to bring in extra tonnage has been limited. At the same time, demand for container transport has remained strong.
Planning for demand peaks around Lunar New Year helped soften the impacts of the Red Sea situation in the first quarter of 2024. However, since April and May the challenges have intensified.
Another major challenge for carriers has been increased costs. With cargo journeys lengthened and capacity squeezed, the price per container has risen significantly. Maersk has taken on these costs knowing that many of them will remain beyond the Red Sea situation. For example, ships cannot be chartered for a few months to fill the current gaps. Instead, carriers are having to sign up to several years at the higher charter rates. Vincent Clerc said that this is one of the reasons freight rates are temporarily higher.
Vincent Clerc stressed that Maersk would only return to sailing via the Red Sea / Gulf of Aden when the safety of seafarers, vessels, and cargo was guaranteed. He said that once a resolution is found, ships could return to sailing their usual routes through the Suez Canal almost immediately. Others would need to complete their journey around the Cape of Good Hope first. Vincent Clerc warned that there would be a period during which the ships on these different routes would be arriving at ports at similar times. He expected this to cause congestion at ports, before returning to a more stable scenario.
Maersk has asked governments internationally for a stronger presence in the Red Sea / Gulf of Aden. Vincent Clerc added that so far ‘this has been unsuccessful’. He said that businesses around the world can help by ensuring their governments understand they are being crippled by increased costs. In some regions like Europe, he said that governments need to understand the possibility that this will reignite inflation.