The long way round: what the Red Sea diversions did to the box market
When container lines stopped transiting Bab el-Mandeb, they did not lose ships — they lost weeks. The maths of a 10-to-14-day detour explains almost everything that followed in rates, schedules and port congestion.
A container service is a loop. A fixed number of ships, spaced a week apart, cycle between a set of ports. Add ten days to the loop and either the service needs more ships to hold weekly frequency, or the frequency slips. In late 2023 and 2024 the lines chose the first option, and pulled capacity from everywhere else to do it.
Rates followed the ships, not the risk
The Shanghai index (SCFI) tripled in the first weeks and stayed elevated for months. It is tempting to read that as a risk premium. It was mostly a capacity effect: the same cargo, the same ships, a longer loop. When the market later softened, it was because newbuild deliveries — the largest orderbook in the industry's history — caught up with the longer loops.
Who kept going
Not everyone rerouted. Tankers with certain flags, some bulk carriers, and ships whose owners judged the risk differently continued to transit. The war-risk premium (WAR.RS) — quoted as a percentage of hull value for a single voyage — became the price of that judgement, and it moved with each incident rather than with any index.
What to watch now
The transit count at Bab el-Mandeb (BAB.TX) is the cleanest single indicator. Rates lag it. Insurance leads it. When the count recovers and the premium falls for more than a few weeks, the loops will shorten again — and the capacity that returns will land on a market that has been building ships for the long route.