Leading shipping companies move to halt journeys through Red Sea

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Two of the world’s biggest container shipping companies have halted journeys by their vessels approaching the entrance to the Red Sea in response to mounting security threats, moves that risks serious disruption to trade through the Suez Canal.

AP Møller-Mærsk, the Danish group that operates the world’s second-largest container shipping fleet, said on Friday that it had instructed all its vessels bound to pass through the Bab-el-Mandeb strait at the southern end of the Red Sea to “pause their journey until further notice” after a spate of attacks by Yemeni rebels.

“We are deeply concerned about the highly escalated security situation in the southern Red Sea and Gulf of Aden,” the company said, adding that attacks on commercial vessels in the area posed a “significant threat” to crews. Also on Friday, German company Hapag-Lloyd, the fifth largest container shipping group, said it was “pausing all container ship traffic through the Red Sea until Monday. Then we will decide for the period thereafter.”

Mærsk also revealed a “near-miss” attempted attack by Yemeni Houthi rebels on the Mærsk Gibraltar near the Bab-el-Mandeb on Thursday. It also cited an attack on Friday on the Al Jasrah, a container ship operated by Hapag-Lloyd. Reports said the vessel suffered a fire after being hit by a projectile.

The decision came after Maersk Tankers, a separate operator of tankers for refined oil products, said it would be routing all its vessels travelling from Asia to Europe around the Cape of Good Hope in South Africa to avoid the danger area.

The Iran-backed Houthis who control a swath of Yemen have stepped up attacks on tankers in the strategically important trade corridor, dragging tanker owners into the conflict in the Middle East, after Hamas’s attack on Israel on October 7 triggered a war that has killed thousands in Gaza.

Disruption to the Suez Canal route has the potential to cause serious disruption to world supply chains. The canal, which links the Red Sea to the Mediterranean, handles about 30 per cent of all traffic on the container ships that are the main means of moving manufactured and semi-finished goods internationally. It is also a vital conduit for energy shipments such as crude oil.

Maersk Tankers, which operates one of the world’s largest tanker fleets, said in a memo to customers that the “rapidly escalating” security situation meant it would insist its tankers had the option of diverting via the Cape of Good Hope, and that this had to be at its “sole discretion”.

A clause with specific wording would be sent to customers soon, the Copenhagen-based company said in the note. The company on Friday declined to comment on the contents of the memo.

Henning Gloystein, a director at Eurasia Group, said Maersk’s decision to pause journeys into the Bab-el-Mandeb was a “significant escalation” and would add “thousands” of miles of travel to trade between Europe and the Indo-Pacific region.

“All these supply chain shocks since the start of the Covid-19 pandemic cause huge economic damage,” even if it was hard to immediately quantify the hit to global GDP, he said. “But it definitely hurts. Export economies suffer from these disruptions just as much as import-reliant economies and emerging markets.”

Ship owners this month called for protection on maritime routes in the region after the Houthis widened attacks in response to the war in Gaza.

The Pentagon said this month that a US warship was among vessels that came under attack off the Yemeni coast, which national security adviser Jake Sullivan described as “totally unacceptable”.

The rebels, who have controlled large parts of Yemen since 2014, have attacked more than 10 ships since the outbreak of the Israel-Hamas war and have threatened to target any vessels heading to Israeli ports, according to S&P Global Commodity Insights.

Svetlana Lobaciova, senior market analyst at EA Gibson Shipbrokers, said she was aware of another big owner who was “talking” about following Maersk Tankers’ example.

While there are still a large number of ship owners willing to go through the Red Sea, the situation was “fluid and things could change going forward”, she said. “Most owners are having to get new [insurance] quotes as we speak,” she said.

Oil prices were little changed on Friday, with the international benchmark Brent crude up 0.3 per cent at $76.84 a barrel. Maersk’s share price jumped 7 per cent on expectations that the crisis would cause freight rates to rise.