Global shipping firms have made the decision to prolong the suspension of shipments through the Red Sea, amidst ongoing security concerns and escalating attacks by Houthi militants.
Maersk (MAERSKb.CO) and Hapag-Lloyd (HLAG.DE) announced on Tuesday that their container ships will avoid the Red Sea route to the Suez Canal following an attack on one of Maersk’s vessels.
Due to ongoing attacks by Houthi militants in the Red Sea, both shipping giants have been redirecting some sailings through Africa’s Cape of Good Hope. This disruption poses a threat of increased delivery costs and the possibility of global inflation.
Maersk temporarily halted all Red Sea sailings for 48 hours after attempted boarding by Houthi militants on the Maersk Hangzhou. The attackers were repelled by US military helicopters, resulting in their deaths.
Maersk stated that cargo movement through the area will remain paused while they assess the situation. Vessels will be rerouted around the Cape of Good Hope when appropriate for their customers.
More than 30 Maersk container vessels planned to pass through the Suez Canal via the Red Sea, but these plans have been put on hold. Hapag-Lloyd also continues to divert its vessels away from the Red Sea and will decide on January 9 whether to continue rerouting.
Redirecting ships around Africa’s southern tip instead of the Suez Canal is estimated to cost an additional $1 million in fuel for each round trip between Asia and northern Europe. Concerns about Middle Eastern supply disruption following the Red Sea attack have also driven up oil prices.
The expectation of higher freight rates due to longer routes has boosted shipping companies’ stock prices since the crisis began. Maersk shares were up 6.3% and Hapag-Lloyd shares were up 5% in late afternoon trading.
French shipping group CMA CGM plans to increase its container shipping rates from Asia to the Mediterranean by up to 100% starting from January 15.
Although the Maersk Hangzhou was attacked, it was able to continue its journey and is currently near the Suez Canal according to shipping data.
The Houthi militants, backed by Iran, have been targeting international shipping since November in support of Hamas’s conflict with Israel. This led major shipping groups, including Maersk and Hapag-Lloyd, to avoid the Red Sea routes and opt for the longer Cape of Good Hope route.
Maersk’s alliance partner, Mediterranean Shipping Company (MSC), continues to divert its vessels through the Cape of Good Hope.
