Global Shipping Giants Navigate Challenges Amidst Escalating Red Sea Crisis

Date: January 4, 2024

In the wake of escalating tensions and security threats in the Red Sea, major shipping companies are grappling with critical decisions to ensure the safety of their vessels and crews. The crisis, marked by recent attacks on container ships, has prompted a swift and varied response from industry leaders, reflecting the complex and evolving nature of the situation.

On Sunday (Dec 31) Maersk containership Maersk Hangzhou was subject to attack while transiting the Red Sea. The incident led to the US military intervention as part of Operation Prosperity Guardian, resulting in the death of 10 Houthi rebels. On Tuesday, Maersk said it would suspend Red Sea transits indefinitely and reroute ships around Africa’s Cape of Good Hope.

This came days after Maersk announced that it would resume transiting the Red Sea under the protection of Operation Prosperity Guardian. Maersk had 38 vessels scheduled to transit the Red Sea en route to Europe and the U.S. East Coast before Tuesday’s announcement, plus another 25 ships with routes labelled “to be determined.” These vessels will now presumably take the longer route. The latest on Maersk service information can be found here.

Wallenius Wilhelmsen is rerouting all vessels planned for Red Sea transit via the Cape of Good Hope, until further notice. They anticipate this will add an estimated 10-14 days extra sailing time.

Hapag-Lloyd, announced today that they were introducing a shuttle service connecting Red Sea cargo via Jeddah, SA. A feeder service has been arranged whereby Aqaba, JO and Port Sudan, SD are routed via Jeddah, SA. Ineligible cargo will continue to be rerouted for transit via the Cape of Good Hope. Hapag-Lloyd has set up a Live Ticker for updates on service information

MSC’s MSC United VIII faced an attack on December 26 while transiting the Red Sea Thankfully, all crew members are reported to be safe with no injuries sustained during the incident. In their latest statement, MSC has announced that until the lives and safety of their seafarers are ensured they will continue to reroute vessels booked for Suez transit via the Cape of Good Hope.

CMA CGM, a global shipping giant, has adopted a nuanced approach to the Red Sea situation. Some vessels have been rerouted, while others continue their course through the region. CMA CGM announced they are devising plans for the gradual increase in the number of vessels transiting through the Suez Canal.

Impact on Shipping Rates

The crisis has caused a surge in container shipping spot rates, liner costs and fuel consumption for the longer voyages. Diverted ships may impact cargo volumes. Emergency surcharges announced by carriers, such as AAL Shipping, suggest that costs are likely to rise even further. It’s coupled with a significant increase in insurance premiums for commercial sailings through the region.

International Coalition Responds

Recognizing the severity of the situation, an international coalition comprising the United States, Australia, Bahrain, Belgium, Canada, Denmark, Germany, Italy, Japan, Netherlands, New Zealand, and the United Kingdom has affirmed their commitment to addressing the challenges in the Red Sea in a joint statement from the governments.

In this statement, the coalition gave a final warning to the Houthis: “Let our message now be clear: we call for the immediate end of these illegal attacks and release of unlawfully detained vessels and crews.  The Houthis will bear the responsibility of the consequences should they continue to threaten lives, the global economy, and free flow of commerce in the region’s critical waterways.

“We remain committed to the international rules-based order and are determined to hold malign actors accountable for unlawful seizures and attacks.”

As the Red Sea crisis unfolds, major shipping companies are navigating unprecedented challenges. The global shipping industry must remain vigilant and adaptive, with collaborative efforts on an international scale becoming increasingly crucial to ensuring the continued flow of maritime trade.

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