New headwinds for the Suez Canal? Four of the world’s largest shipping firms, including Mediterranean Shipping (MSC), AP Moller-Maersk, CMA CGM, and Hapag-Lloyd, have said that they are pausing transit through the Red Sea due to repeated attacks on shipping by Houthi groups in Yemen, company representatives tell Enterprise.

The halt in transit is hopefully just a temporary measure: “We are not happy with the decision and hope that navigation returns to normal,” Maersk’s MENA Chief Group Representative, Hany El Nady, tells us. “The Suez Canal is the most suitable and safest navigation route for international trade to cross … unlike the open sea, which is not devoid of its own risks.” The news was first reported by the Wall Street Journal and France 24.

Talks to boost security for vessels: Maersk is in talks with the European Union, the International Maritime Organization, and others to form an alliance for safer transit in the Red Sea, El Nady says.

The situation has been escalating for some time: Attacks on ships passing along the Red Sea have been making headlines since Israel started its war on Gaza, as the Iranian-backed Houthis in Yemen look to pressure Israel. While Israeli ships were originally the sole target, armed Houthi groups upped the ante last week by announcing that they will target all shipping companies that work with Israeli ports, regardless of nationality.

In the past few days:

  • Egyptian forces intercepted a flying object that crashed near the coast of Sinai’s Dahab.
  • The US military shot down 14 drones in the Red Sea that were allegedly launched from Houthi-controlled areas of Yemen.

It’s too early to predict the impact on our Suez Canal receipts: The Suez Canal Authority has yet to release a statement on potential impact of the companies’ decisions, but how much it bites will be directly proportional to how long it lasts. While it’s not clear how much of the traffic passing through the Suez Canal belongs to the four shipping lines, they account for more than 50% of global sea shipping. Around 12% of the world’s trade and 22% of all global shipping containers pass through Suez Canal each year.

Bad news for global supply chains: The price of freight globally is likely to become more expensive and push up global inflation with it, Mohamed Daoud, the vice president of the Arab Academy for Science, Technology and Maritime Transport, told us. Some companies are already paying fines for the delayed arrival of goods to various ports, a senior executive at a shipping company told us.

Alternative routes via the Cape of Good Hope add an additional 10-14 days and rack up the fuel bill, according to Al Nady.

The US is pushing for the “broadest possible” maritime coalition to protect ships in the Red Sea, the US envoy for Yemen told Reuters last week. The Biden administration has been careful in the past two months on retaliating the Iran-backed Houthis’ attacks to avoid opening a new war front that would cause the oil prices to jump to unprecedented heights.

** Want to go deeper into how shipping firms are adapting to the Gaza war?EnterpriseLogistics has the low-down.

SCA EXTENDS TRANSIT FEE CUTS-

SCA extends transit fee reductions for multiple classes of vessels: The Suez Canal Authority (SCA) has extended transit fee reductions granted to LNG tankers, dry bulk vessels, and oil tankers, among others until 30 June 2024. Vessels operating between a number of regions, including the US Gulf, India, and the Caribbean will receive rebates ranging from 25-75%. Enterprise Logistics has the rundown.

Tags: