MariTrace, 21 December 2023
Attacks on commercial vessels transiting the Red Sea have brought global attention to the spill-over effects of conflict in Yemen and the Israel-Gaza war, still raging 1,200 miles to the north. A month on from the high-profile hijacking of the car carrier GALAXY LEADER, currently anchored at Hodeidah since 21 November, risks to commercial shipping and seafarers’ safety are generating concern while also fuelling speculation about supply chain security and proportionate response.
On 14 December, shipping giant AP Møller-Maersk intimated that its fleet of fuel vessels would ‘have the option’ to avoid the Red Sea. This was shortly followed by a company announcement on Friday 15 December at 4pm UTC that Maersk would pause all container shipments through the Red Sea until further notice and send vessels on an alternative route, around the Cape of Good Hope. In their statement, Maersk drew attention to the effects of the escalated security situation in the southern Red Sea and Gulf of Aden, calling attention to the “significant threat to the safety and security of seafarers”.
The announcement by Maersk was swiftly followed by similar decisions from other container shipping companies, first by MSC. By Thursday, CMA CGM, Evergreen, Euronav, Hapag-Lloyd, HMM, Ocean Network Express, OOCL, Wallenius Wilhelmsen and Yang Ming Marine Transport had joined the list of companies diverting or re-routing vessels. On Monday, BP became the first major oil company to pause all shipments through the high risk area and were soon followed by Equinor and Frontline. By Wednesday, oil prices were rising again, with benchmark Brent crude at just over $80 per barrel, fuelled by concerns about security of supply disruptions in the Red Sea - however, analysts have noted it is unlikely that there will be a direct, large effect on oil and LNG prices because the increased security risks threaten tanker movement, not oil and gas production.
On Wednesday, shipbrokers said that some oil tanker owners have inserted a clause into shipping contracts to include a Cape of Good Hope option. The re-routing will extend journeys from Asia to Northern Europe by about 31 to 40 days. While it is widely expected that freight rates could double in response to current situation in the Red Sea, analysts do not expect the scale of disruption seen during 2021. But with insurance costs rising, the effects of the current phase of conflict will be felt for many months to come: war risk premiums have increased to approximately 0.5%-0.7% of the value of a ship, up from 0.07% in early December. On Tuesday, the Joint War Committee (an 17-member group of London-based marine insurers) expanded the listed area for the Bab el-Mandeb Strait and southern Red Sea: we updated MariTrace immediately to reflect the revised zoning.
Also on Tuesday, the US formally announced a maritime security mission called 'Operation Prosperity Guardian', although the contributions from other navies are not formalised and the practical implications for the shipping industry are as yet unclear.
No AI was used in the writing of this article. MariTrace analysis and reporting is based on open sources; all information is human-curated and assessed via multi-phase, structured methods using industry-standard techniques to check for provenance, bias and accuracy.
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