Diverging opinions among shipping companies over resuming operations in the Red Sea amidst ongoing Houthi attacks
Shipping companies remain divided on whether to resume operations in the Red Sea despite a new security operation led by the US This highlights the ongoing fragility of the situation in one of the world's crucial trade routes, potentially leading to increased shipping costs
Despite a new US-led security operation in the Red Sea, some major shipping companies are still avoiding the area, underscoring the ongoing fragility of this crucial trade route. Hapag-Lloyd and Evergreen Line, as well as MSC, have all confirmed that they will continue to reroute their vessels through the Cape of Good Hope at the southern tip of Africa.
A spokesperson for Hapag-Lloyd Germany stated that the situation is still deemed too dangerous to pass through. They will be re-evaluating the situation and conducting their next review on Friday. In an update released at 5 a.m ET on Friday, Hapag-Lloyd confirmed that they are still diverting their ships to steer clear of the Red Sea and Suez Canal.
Evergreen Line directed CNN to a statement dated December 18, in which the company announced the suspension of its container ships' navigation through the Red Sea "until further notice."
The approach of the two companies is different from that of other shippers, who have resumed transit through the important waterway despite ongoing attacks on commercial vessels by Houthi militants. The Iran-backed rebels have claimed that the assaults are a form of retaliation against Israel for its military campaign against Hamas in Gaza.
Danish shipping company Maersk announced on Sunday that it will be resuming transit through the Red Sea and the Gulf of Aden to its southeast, following the establishment of a US-led international naval mission to protect commercial shipping in the area.
The Maersk Sentosa container ship sails southbound to exit the Suez Canal in Suez, Egypt, on Thursday, December 21, 2023.
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Maersk announces the resumption of shipping in the Red Sea
Maersk has stated that Operation Prosperity Guardian will once again permit shipping vessels to travel through the area. The company referred to this development as "most welcome news for the entire industry and indeed the functionality of global trade."
CMA CGM, a French company, announced on Tuesday that after carefully assessing the security situation, some of its ships had passed through the Red Sea. The company stated that it is currently making plans to gradually increase the number of vessels navigating through the Suez Canal, a crucial route that connects the Red Sea to the Mediterranean and handles about 30% of global container trade.
The persistent insecurity in the area was evident on Tuesday when a vessel owned by container shipping company MSC was attacked while traveling from Saudi Arabia to Pakistan. "Our top priority is still to protect the lives and safety of our sailors, and until their safety can be guaranteed, MSC will continue to redirect vessels scheduled for Suez transit through the Cape of Good Hope," the company stated.
Shipping costs to rise
Shipping costs look set to rise regardless of whether companies use the Red Sea or send ships on the longer, more expensive route via Africa.
Maersk, CMA CGM and Hapag-Lloyd have all announced new charges in recent days to transport goods along many of the worlds busiest trade routes.
The Maersk Sentosa container ship sails southbound to exit the Suez Canal in Suez, Egypt, on December 21, 2023.
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Shipping expenses are increasing due to longer routes being taken by vessels as a result of attacks in the Red Sea.
Hapag-Lloyd recently announced an "Emergency Revenue Charge" for cargo traveling to and from the Red Sea until the end of the month, citing the ongoing disruptions and operational adjustments caused by the dynamic situation in the region.
The latest initiative will result in an additional $1,000 charge for a standard 20-foot container traveling eastbound through the Suez Canal, and $1,500 for those heading west through the Gulf of Aden.
Maersk and CMA CGM have also implemented comparable measures. With certain fees set to come into force in January, there are growing concerns that the shipping disruptions may impact the cost of consumer goods if companies decide to pass on increased transportation expenses to customers as demand rebounds.
Israel's military action in Gaza has also contributed to the increase in natural gas prices on Wednesday. Concerns about the potential escalation of the conflict into a regional crisis led to Europe's benchmark natural gas contract rising by nearly 5% to reach close to â¬36 ($40) per megawatt hour by 9 a.m. ET.
Despite record levels of stored gas in Europe and mild temperatures, prices remain somewhat restrained. Timera Energy, a consulting firm, highlighted the presence of bullish risks heading into 2024, such as geopolitical tensions, including the risk related to the transit through the Red Sea, in a recent note.
