Red Sea crisis, Panama Canal drought pose no risk to Indonesia’s shipping

It was a different story altogether for international shipping, Indonesian National Shipowners Association chairperson Carmelita said, as the Red Sea crisis had pushed up rates 55 to 63 per cent for freight shipping between Asia and Europe.

Deni Ghifari

Deni Ghifari

The Jakarta Post


File photo of shipping containers at the Panama Canal. PHOTO: UNSPLASH

January 17, 2024

JAKARTA – The Indonesian National Shipowners Association (INSA) has said that although the Red Sea crisis and the Panama Canal drought have driven up international shipping costs, neither posed a risk to the country’s shipping companies, as none sailed those routes.

“There is no impact to national shipping, because [Indonesian vessels] do not navigate in the conflict area,” INSA chairperson Carmelita Hartoto said, as quoted by Kontan on Monday, referring to the maritime region affected by the Israel-Hamas war.

It was a different story altogether for international shipping, Carmelita said, as the Red Sea crisis had pushed up rates 55 to 63 percent for freight shipping between Asia and Europe.

Since early January, the Houthi rebel group, which controls most of the Yemeni coast along the Red Sea as well as its capital Sanaa, has been attacking commercial vessels with alleged links to Israel in the major trade waterway to express its solidarity with Palestinians in Gaza.

In response, United States and British forces launched air strikes targeting 16 Houthi-controlled locations last Thursday, CNN reported, prompting retaliatory Houthis attacks on US vessels in the Red Sea.

The rebel group attacked a US navy destroyer on Sunday, followed by an assault on a US-owned container ship on Monday, Al Jazeera reported.

The attacks have prompted top international shipping companies to avoid the Suez Canal, the shortcut through Egyptian waters that accounts for 12 percent of global maritime traffic.

Since it opened more than 150 years ago, the canal has provided the shortest maritime route between Asia and Europe, connecting the Indian Ocean and the Mediterranean Sea via the Red Sea.

“So international shipping must avoid the Suez and go via the South African route. This does not affect national shipping, because our routes do not head to Europe,” said Carmelita.

Shipping giants like Denmark’s Maersk and Germany’s Hapag-Lloyd had rerouted their vessels on the longer, more expensive journeys around South Africa’s Cape of Good Hope for the foreseeable future, Reuters reported.

The extra distance adds around 10 days to ship between Asia to Northern Europe and around US$1 million in extra fuel costs.

On the opposite side of the globe, international shipping has been disrupted by historic low water levels in the Panama Canal following prolonged drought, leading to congestion and record transit costs.

One shipping company even paid as much as $2.4 million to cut the queue, Business Insider reported in September.

“Operators would rather wait [in line] than take longer and more expensive routes,” explained INSA’s Carmelita.

The situation at the Panama Canal had delayed US wheat and corn shipments to Asia, as the Panama Canal Authority was prioritizing container and passenger vessels, Carmelita said.

She added that this would not severely impact Indonesia, which imported most of its wheat from Australia, underlining that the disruption to international shipping due to issues surround the two waterways would not lead to significant pressure on Indonesia’s logistical costs.

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