Red Sea shipping disruption could last ‘at least a few months’ Maersk boss says

Shipping companies are taking a longer route around the southern tip of Africa to avoid possible attacks by Houthi rebels

A ship in the Suez Canal near Ismailia, Egypt. Getty Images
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The disruption to global shipping in the Red Sea could last at least a few months as Houthi attacks continue, according to the chief executive of shipping major Maersk.

"The Bab Al Mandeb Strait is one of the most important arteries of global trade and global supply chain and it's clogged up right now,” Vincent Clerc told the World Economic Forum in Davos on Wednesday.

“So for us, this will mean longer transit times and probably disruptions of the supply chain for a few months, at least, hopefully shorter but equally it [could] also be longer because it's so unpredictable how this situation is actually developing.”

Bab Al Mandeb, on the southern edge of the Red Sea, is a route for oil tankers and cargo ships sailing between the Arabian Gulf and Asia, as well as to Europe through the Suez Canal.

About 12 per cent of the world's seaborne oil trade and 8 per cent of liquefied natural gas passes through the strait.

Maersk, along with other big shipping companies including Europe-based MSC, CMA CGM and Hapag-Lloyd as well as Asia-based Cosco Shipping, have suspended their operations along the Red Sea route after attacks by Houthi militants on vessels passing through the waterway connecting Asia and Europe.

Shipping companies are taking a longer route around the Cape of Good Hope at the southern tip of Africa, which increases sailing time by 10 to 14 days compared with the Red Sea route to transport goods to Europe and other destinations, leading to higher shipping costs and causing concerns about higher inflation globally.

This week, Qatar also temporarily paused some LNG shipments by the Red Sea route after air strikes by the US and the UK on Houthi targets to thwart attacks by Yemen-based militants on transiting vessels. However, some vessels have resumed sailing through the trade route, according to live updates from the Marine Traffic ship tracker.

How could Houthi attacks in the Red Sea affect global trade?

How could Houthi attacks in the Red Sea affect global trade?

“The conflict ... is absolutely horrifying [and] it's really hard to see that there can possibly be any winner or loser, or there will only be losers in the end. But that is a kind of call for attention and for action, to try to do something and it is extremely disruptive,” Mr Clerc said.

Charges for transporting a 40-foot container from China to Europe through the Red Sea had surged to about $4,000 by January 9, according to the Drewry World Container Index, which tracks container freight rates on eight major routes to and from the US, Europe and Asia.

That is a 248 per cent jump from $1,148 from November 21, the week the attacks began, and a 140 per cent increase from $1,667 on December 23, data from London-based Drewry showed.

The number of commercial vessels including container ships, tankers and bulk carriers transiting the Suez Canal was down by about 20 per cent to 30 per cent on an annual basis as of January 8, rating agency Moody’s said on Wednesday.

“Container freight rates have doubled or even tripled compared to a year ago on major East-West routes, although they remain far below the peak in 2021-22,” it said.

Updated: January 17, 2024, 2:49 PM