Stop the Red Sea attacks? Maersk, Hapag-Lloyd and other shipping giants responded
News of the Israeli-Palestinian ceasefire has again raised hopes of a return to normal shipping on the Suez Canal in the Red Sea. The leader of Yemen's Houthi militia announced Monday that the group would monitor the implementation of a ceasefire between Israel and Hamas aimed at ending the Gaza war, Reuters reported. If the deal is broken, the Houthis will continue to launch attacks on ships or Israel.
How did the shipping giants respond? Not going back to the Red Sea any time soon! A shipowner bluntly "too naive"!
Israeli and US air strikes over the past month have significantly weakened the Houthis, making them eager to find an opportunity to declare a ceasefire and end their campaign. The Houthis have been using missiles and drones to attack ships in waters off Yemen in a show of support for the Palestinians and have said they will stop if the 15-month conflict ends. The Gaza ceasefire is expected to take effect on the 19th.
In a televised address, Houthi leader Abdul Malik al-Houthi stressed that they would continue to monitor Palestinian developments in the three days before the Gaza deal goes into effect and would act accordingly if Israel continued its attacks. Since November 2023, the Houthis have launched more than 100 attacks on ships, resulting in the sinking of two vessels, the seizure of one vessel and the death of at least four sailors.
Despite the ceasefire agreement between Israel and Hamas, international industry sources say the risk to shipping in the Red Sea remains high. For the time being, most shipping lines and charterers will continue to choose to transport tankers and cargoes via the longer Cape of Good Hope route. Maersk and Hapag-Lloyd made it clear on Jan. 16 that they did not expect shipping companies to return to the Red Sea immediately after the cease-fire between Hamas and Israel was announced. Both companies said they would closely monitor the situation in the Middle East and would only return to the Red Sea if it was safe.
The Hapag-Lloyd spokesman noted that the ceasefire agreement has just been reached and they will closely analyze the latest developments and their impact on the security situation in the Red Sea. A Maersk spokesman said it was too early to speculate on when the routes would resume. In fact, Hapag-Lloyd pointed out as early as June last year that the ceasefire does not mean that the Suez Canal can be immediately reopened to traffic, because the risk of Houthi attacks remains, and the rescheduling of the route plan could take four to six weeks.
Unrest in the Middle East has led shipping companies to divert vessels to longer routes, forcing their container ships around the Cape of Good Hope in Africa, pushing up freight rates and disrupting global shipping. After the temporary ceasefire in the Gaza conflict, the shipping industry's wait-and-see attitude has not changed. Shipowners and industry analysts say the ceasefire will not be enough to prompt shipping lines to re-enter the Red Sea and stop circumnavigating Africa.
The Houthis have launched attacks on commercial vessels transiting the Red Sea since mid-November 2023, claiming the move was in retaliation for Israel's military operation in the Gaza Strip and to pressure Israel and its Western Allies to halt the conflict with Hamas. It is estimated that more than 100 ships have been attacked. Although the ceasefire has been agreed and is scheduled to take effect on Sunday, it is unclear whether the Houthis will change their tactics as a result. Some media outlets quoted unnamed Houthi officials as saying the ceasefire alone would not be enough to change their position.
The shipping industry is still in a wait-and-see mode as to whether the Red Sea will reopen. The industry generally believes that the attitude of the Houthi armed forces is the key factor affecting whether the shipping industry can resume the Red Sea route. Shipping giants such as Maersk and Hapag-Lloyd have made it clear that they will not immediately resume the Red Sea route, and will closely monitor the situation in the Middle East, and will only return to the Red Sea if it is safe to do so.
Lars Barstad, CEO of oil tanker giant Frontline Management, also made it clear on social media that the ceasefire agreement itself does not mean that the shipping industry can return to normal. Pareto Securities analyst August Klemp said that while the ceasefire agreement could be a first step towards reopening the Red Sea, a real return to normal navigation would require a change from the Houthis. Mark Williams, head of UK-based Shipping consultancy Shipping Strategy, and Lars Jensen, head of container shipping consultancy Vespucci Maritime, are also cautious. Shipping companies need to see a ceasefire in place and ensure Houthi attacks stop before they consider returning to the Red Sea.
Fearnleys analysts Fredrik Dybwad and Nils Thommesen pointed out that the ceasefire agreement is a first step towards reopening the Red Sea and Suez Canal, but it is still possible that the Houthis will continue attacks to secure their ports and oil infrastructure in Yemen. Moreover, Iran is likely to increase its support for the Houthis as a proxy against Israel. If the Red Sea is reopened, it will have a negative impact on freight rates in related industries, especially container ships and car carriers. However, August Klemp believes that the tanker market may not be affected in the same way and that the market will find a balance.
Overall, the Red Sea crisis has had a profound impact on the global shipping industry. Despite the ceasefire agreement between Israel and Hamas, shipping companies remain cautious about returning to the Red Sea route. The motive of the Houthi attack is complex, involving multiple factors such as regional political and economic interests and international relations. The industry's wait-and-see attitude reflects its sensitivity to risk and its ability to react quickly to changes in the market. Security in the Red Sea will require a multi-party effort, and Houthi movements remain key to decisions in the shipping industry. Shipping companies need to maintain flexibility in an uncertain geopolitical environment to ensure crew safety and maximize shipping benefits.
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