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Updated December 22nd, 2023 at 23:16 IST

Cargo carrier trade facing tough times as shippers shun Red Sea after armed escalation

Diversion of shipping lines taking place through Cape of Good Hope, leading to sharp rise in transit time and freight costs.

Saqib Malik
attack in Red Sea
Red Sea | Image:AP
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Trade across the world, which has a huge dependence on container shipping, is going through turbulent times, after ambush by Iran-supported militant group Houthi on ships ferrying across the Red Sea/Gulf of Aden, Major shipping companies have paused transiting the Middle East's critical Bab al-Mandeb chokepoint for seaborne trade since December 15 after repeated attacks by Yemen's Houthi militants threatened to upend global trade flows. The container ships are now being diverted via the Cape of Good Hope at the southern tip of Africa, resulting in a sharp rise in both transit time and freight cost. These ships burn a million dollars worth of fuel per trip more than they would if they went via the Suez Canal.

As per S&P Global Commodity Insights report, a Denamrk-based shipping frirm A.P Moller-Maersk, which accounts for 15 per cent of world's container freight market, suspended voyages passing through the Bab al-Mandeb, till it further intimates on the operations. Hapag-Lloyd, which controls 7 per cent of the container market, also halted traffic through the Red Sea after one of its ships was attacked by Houthis.

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On December 15, Hapag-Lloyd's Liberia-flagged Al Jasrah containership caught fire in the Red Sea after being hit by a missile from Houthi rebels in Yemen. The attack came a day after the Houthis attacked the Maersk ship Gibraltar on Dec 14 in a near-miss by a cruise missile.

Suspensions of the containers, as per the report, are fresh signs that major ship charterers, whoof late deployed armed guards to safeguard transit through Bab al-Mandeb have started to reconsider using the narrow strait through which 10 per cent of global seaborne oil flows.

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As per the S&P Global Commodity Insights report, Houthis have put out a hit list and warned to attack ships that have Israeli ownership or are their way for one of the country’s ports. As a result, all commercial ships have come under attack, from car carriers to tankers and dry bulkers, including many with no obvious connection to Israeli trade.

"The pattern I see [in the] last few days is more attacks on all these container line big boys like MSC, Maersk, NYK Line, Hapag-Lloyd. If you scare them, then you stop hundreds of their ships," Luv Menghani, a shipbroker with Dubai-based BluePeak Commodities and Shipping was quoted in the report.

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Maersk's instruction to its ships to avoid the Red Sea "suggests an escalation in the response to the Houthi attacks," Gregory Brew, an analyst with Eurasia Group, said.

"Yesterday's attacks suggest the Houthis are broadening their attacks are becoming more indiscriminate, rather than focusing just on ships owned by Israeli companies or bound for Israeli ports," he added.

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Published December 22nd, 2023 at 23:16 IST

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