DISRUPTION IN RED SEA ‘COULD LAST AT LEAST FEW MONTHS’
▶ Bab Al Mandeb is ‘clogged up right now,’ says chief executive of Maersk
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.
Bab Al Mandeb “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.
“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 and Asiabased Cosco Shipping, have suspended their operations along the Red Sea route after attacks by the Yemeni militants on vessels passing through the waterway that connects Asia and Europe.
Shipping companies are taking a longer route around the Cape of Good Hope at the southern tip of Africa. This increases sailing times by 10 to 14 days, compared with the Red Sea route to transport goods to Europe and other destinations. As a result, shipping costs have increased, 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.
“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 40foot 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 on 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.
“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.