This browser is not actively supported anymore. For the best passle experience, we strongly recommend you upgrade your browser.
Welcome to Reed Smith's viewpoints — timely commentary from our lawyers on topics relevant to your business and wider industry. Browse to see the latest news and subscribe to receive updates on topics that matter to you, directly to your mailbox.
| 1 minute read

Red Sea attacks impose costs and delay on business

8 of the world’s top 10 container carriers are diverting vessels around the Cape of Good Hope. This results in additional delay and expense, with additional sailing time of around 10 days and a container surcharge of at least $500 per TEU. Surcharges are greater for cargo being shipped to the Eastern Med or Red Sea ports. This is a new challenge for cargo interests and their logistics providers.

The deteriorating security situation in the Red Sea has far-reaching implications for world trade. Vessels navigate through the Red Sea to access the Suez Canal, a crucial link connecting Asia with Europe.

The recent surge in attacks has prompted some major operators to avoid the Red Sea altogether and proceed via the Cape of Good Hope. This not only incurs additional time and expense, but also exacerbates the environmental impact through increased fuel consumption.

 Some operators have adopted a "keep calm and carry on" approach and continue to transit the Red Sea. The London marine insurance market has widened the area in the Red Sea judged to be “high-risk” and which is an additional insurance premium area.

The timing of these security issues compounds difficulties for operators, coinciding with disruptions in transits via the other great canal, the Panama Canal. In this case, a severe drought has reduced the Panama Canal's capacity. In both cases, many operators are taking the longer and more expensive route.  

Whether an owner may take such actions, it is largely regulated by their contract or charterparty.  Usually, the issue will be dealt with in a “war risk” clause, which regulates the situation where the passage through a particular stretch of water exposes a vessel to the risk of attack. In some cases, it is a matter for negotiation on an ad hoc basis to determine the course of action.

The situation remains dynamic, prompting the United States to assemble a task force dedicated to preserving security along this crucial trading route. The outcome of these efforts may significantly impact the overall landscape and present challenges.



shipping, logistics, marine, insurance, maritime, containers, suez canal, yemen, environment, transportation