Houthi threats: Red Sea shipping routes disrupted, prices surge

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YEMEN, Dec 19: Several container ships in the Red Sea are at anchor or have disabled their tracking systems in response to recent maritime attacks by Yemen’s Iran-aligned Houthis along the major East-West trade route. This has prompted concerns about potential disruptions to international commerce. In reaction to the attacks, a US-led international force is patrolling waters near Yemen.

The US is expanding a multinational maritime security force, Operation Prosperity Guardian, in response to increasing missile and drone attacks by Iran-backed Houthi rebels in Yemen. This initiative aims to protect ships in the Red Sea from Houthi threats, particularly as recent attacks have raised concerns about the flow of commerce and endangered mariners. Led by Task Force 153 under the Combined Maritime Forces, the effort involves collaboration with international partners.

The Red Sea, linked to the Mediterranean by the Suez Canal, serves as a crucial shipping route between Europe and Asia, with about 12% of global shipping traffic transiting through the canal. Major shippers, including Hapag Lloyd, MSC, Maersk, BP, and Frontline, have announced plans to avoid the Red Sea route and reroute via the Cape of Good Hope in southern Africa.

Despite these announcements, some ships continue to navigate the Red Sea. Several vessels, equipped with armed guards, are present in the waterway. Notably, at least 11 container ships heading towards countries like Singapore, Malaysia, and the United Arab Emirates are currently anchored in the Red Sea between Sudan and Saudi Arabia.

Data reveals that four MSC container ships in the Red Sea have turned off their transponders since December 17, likely to avoid detection. Some vessels are also using alternative locations to mask their positions when approaching the Yemeni coastline.

Denmark’s Maersk temporarily halted all container shipments through the Red Sea following a “near-miss incident” involving the vessel Maersk Gibraltar. The impact on global trade depends on the duration of the crisis, but immediate concerns include increased insurance premiums and longer shipping routes.

The Iran-backed Houthis have targeted commercial shipping vessels in the southern Red Sea, exacerbating tensions in the Israel-Hamas conflict. The crisis’s impact on global trade remains uncertain, with potential repercussions on insurance costs and shipping routes.

Vortexa’s freight analyst Ioannis Papadimitriou noted a 25% increase in the price of a Suezmax for transporting crude from the Middle East to Europe within a week. While the disruption in the Red Sea may not significantly affect crude and liquefied natural gas (LNG) prices, the redirection of oil flows could impact spot crude prices.

Goldman Sachs suggests that redirecting all 7 million barrels per day of oil flows could raise spot crude prices by $3-4 per barrel. Some oil tanker owners are incorporating a Cape of Good Hope option into shipping contracts as a precautionary measure.

An Asian buyer of naphtha mentioned that their vessels are still using the Red Sea route due to the time-consuming nature of rerouting via the Cape of Good Hope. Some oil tanker owners are adding a Cape of Good Hope option to shipping contracts, and Alibaba’s Cainiao logistics arm anticipates slightly longer delivery times and shipping fees but expects minimal impact on the business overall.

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