OCEAN carriers' short-term profitability will benefit from Houthis strikes on increased freight rates, which exceed the costs of re-routing to the Cape route, according to Fitch Rating service, reports Hellenic Shipping News Worldwide.

Nearly half of all cargo ships and tankers have been diverted away from the Suez Canal to alternative routes around the Cape of Good Hope following attacks on commercial ships in the Bab-el-Mandeb Strait, says the Fitch report. 

Container freight rates have surged as a result, with the World Container Index rising by 151 per cent since early October 2023. Rates on Asia-Europe routes have increased 284 per cent, and more than doubled on other main east-West lanes.

"Red Sea disruptions have persisted beyond our initial expectations in December 2023, with no sign of abatement. Re-routing around Africa has increased transit time for container movement on the Asia-Europe route by about 50 per cent, absorbing capacity in the container shipping sector," said Fitch. 

While operators have some flexibility to offset the longer routes by increasing vessel sailing speed, low excess capacity means other measures, such as the use of idled fleet or delaying planned vessel scrapping, have a limited impact on capacity absorption, they said.