More carriers shirk Red Sea transits as security threats mount

More carriersopt to avoid Red Sea transit: Japanese container and shipping company Ocean Network Express (ONE) is the latest to pause transits across the Suez Canal and Red Sea effective immediately, according to a statement. The vessels will be rerouted around the Cape of Good Hope — or will be temporarily stopped and repositioned in a safe location — as the shipping company looks to safeguard its seafarers, vessels, and cargoes, the statement notes. Recent days have seen a host of carriers make similar announcements, including Germany’s Hapag Lloyd and Taiwan’s Yang Ming Marine Transport and Evergreen.

The numbers speak for themselves: The number of ships crossing the Red Sea, en route to and from the Suez Canal, has dipped 36% m-o-m, the Financial Times reports, citing MariTrace data. At least 57 container vessels — with combined cargo worth some USD 35 bn — are currently taking the Cape of Good Hope rather than crossing the Suez Canal, transport company Kuehne+Nagel’s Paolo Montrone told CNBC.

In a throwback to Covid, carriers stand to benefit from the disruption:The Solactive Global Shipping Index — tracking the value of 47 maritime companies — soared to an all-time high. The index rose 11% over the last week.

Meanwhile, Greece has warned vessels to avoid Yemeni waters and remain vigilant, Reuters reports, citing a Greek shipping ministry advisory document it has seen. The document advises vessels to reduce crew manning bridges and transit the southern Red Sea and Bab El Mandeb strait at night. Greece is also reportedly in talks with EU and US officials to participate in the multinational security force tasked with countering Houthi attacks. Greek shipowners manage 20% of global cargo fleets in terms of load capacity, the newswire said.

LNG carriers are also rerouting:Four LNG vessels have adjusted their routes to steer clear of Yemen, Reuters reports, citing shiptracking data by Kpler, ICIS, and LSEG Eikon. The Celsius Copenhagen crossed the Suez Canal before making a U-turn and doubling back. Some vessels have opted to brave the route, with others still on track to make the transit, the newswire said. Oil major BP announced earlier this week that it would halt all tanker transit through the Red Sea, with a number of energy carriers joining the move.

LNG cargoes will also see delays: Rerouting cargoes via the Cape of Good Hope is expected to cause delays. Qatari cargoes headed to Europe may see their voyage durations booted 145%, an additional 22 days round trip, the newswire said.

A backlog of ships are anchoring beyond the Suez Canal: Some 11 container ships that have transited the Suez Canal are now anchored in the Red Sea between Saudi Arabia and Sudan just beyond the Gulf of Aden, Reuters reports, citing LSEG shiptracking data.

Others are carrying on through employing various strategies: Several ships choosing to transit Yemeni waters have armed guards on board, the newswire writes, citing LSEG data. Some vessels are also choosing to mask their position by turning off their transponders and pinging other locations. Although the tactic might make it harder for attackers to track vessels, it also makes rescue attempts more difficult, the newswire writes.

The disruptions may impact economies and spur inflation: The disruptions to shipping via the Suez Canal could push up prices and weigh on economic growth, Reuters reported on Tuesday, particularly in Europe which is struggling with economic contraction and inflation. Reroutes around the Cape of Good Hope could increase journey times by some two and a half weeks, hiking costs, and decreasing shipping capacity. The increased shipping costs could have ripple effects on the rest of the economy, the newswire wrote.

MARKET REAX- The spate of attacks has made shipping via the Suez Canal more perilous, but it is unlikely to have a prolonged impact on LNG and oil prices, Reuters reports, citing analysts. Despite a rally in oil prices in recent days, ample crude and LNG supplies are expected to curb any prolonged increase in fuel prices. 4-8% of LNG cargoes passed through the canal in 2023, the newswire wrote.

Booking rates and war risk premiums are also up: Rates for booking Suezmax tankers hauling crude from the Middle East to Europe have increased 25% in a week’s time, the newswire wrote citing Vortexa. Ins. war risk premiums have also climbed from USD 2k to USD 10k due to security concerns, the newswire writes, citing an unnamed source.

The Houthis refuse to back down: “Our position will not change in the direction of the Palestinian issue, whether a naval alliance is established or not,” Houthi official Mohammed Abdulsalam told Reuters.

And Malaysia is banning Israeli shipping in solidarity: Malaysia will block Israel-based ZIM Integrated Shipping Services from anchoring at its ports and will ban Israeli-flagged vessels, Bloomberg reports, citing a statement by Malaysian Prime Minister Anwar Ibrahim. The country will also prohibit Israel-bound vessels from loading cargo at its ports. ZIM has said that the cost of transporting containers to Israel has surged from USD 100 to USD 400, IRNA reported, citing Israel Hayom.

To add to troubles, will Somali pirates make a comeback? Maltese-flagged Ruen was hijacked by unknown assailants while sailing off of Somalia’s coast, Reuters reports, citing statements by Spanish defense officials. The incident aggravates fears that pirate activity may resurface in the Gulf of Aden and Red Sea, piling risks in a region that is already contending with an upsurge in attacks on shipping, the newswire writes.