Recent attacks in the Red Sea by Houthi militants in Yemen have caused major freight companies, including Denmark’s A.P. Moller-Maersk, Swiss-based MSC and French group CMA CGM, to choose to reroute their ships away from the Suez Canal.
Market participants speculated that a sustained interruption to this essential passage, which facilitates East-West trade without the need to circumnavigate Africa, might lead to higher shipping rates.
In Copenhagen, Maersk’s shares initially climbed by 3.5% but later saw a reduction in these gains.
By Monday morning, the stocks of D’Amico International Shipping, Hapag Lloyd, and Hafnia all recorded increases ranging from 3 to 4%. Scorpio Tankers and Nordic American Tankers, trading in Frankfurt, saw their shares escalate by 5.6% and 8.9%, respectively.
Massimo Bonisoli, analyst at Equita, said, “We believe that the decision to avoid the Red Sea route for crude/product cargoes will increase transport time and may put further upward pressure on freight rates if this condition persist.”
Analysts at Jefferies highlighted the significant impact on utilisation if ships bypass the Red Sea and navigate around the Cape of Good Hope, with containers and tankers being the most affected segments.
Jefferies analysts further stated, “The Suez Canal is a vital link in seaborne trade and the global merchant fleet is being stretched as ships change trade patterns. All segments are active in the region and likely will see stronger rates in the near-term.”
They also noted that a tanker travelling from the Middle East to Europe would require 17 days via the Suez Canal compared to 41 days if it were to go around Africa. They suggested that military-supported convoys could be a more viable alternative than circumnavigating the Cape of Good Hope.
Maersk announced a temporary halt on Friday to all container shipments through the Red Sea. This decision was soon followed by Swiss-based MSC and French shipping group CMA CGM on Saturday.
Editor’s Note: The Financial Times reported that BP has also suspended oil shipping operations in the Red Sea due to a “deteriorating security situation”