Pellentesque non dolor vitae lacus fringilla consequat vel quis enim. Cras venenatis mollis neque in fringilla. In vitae
Pellentesque non dolor vitae lacus fringilla consequat vel quis enim. Cras venenatis mollis neque in fringilla. In vitae
The Red Sea, a vital shortcut for global shipping, has been a major disruption point for the past year due to Houthi rebels targeting vessels passing through. The ceasefire agreement between Israel and Hamas, ratified on January 19, has prompted Yemen’s Houthi rebels to announce a phased cessation of hostilities against non-Israeli-linked shipping in the region. This shift offers significant implications for global shipping.
For over 12 months, ships navigating the Red Sea were forced to reroute around the Cape of Good Hope, adding 14–15 days to their journeys. This caused significant delays and extra costs for shipping lines, with some vessels diverted for over a year. The Houthis have lifted their blockade on vessels not wholly owned by Israeli entities, but Israeli-flagged and Israeli-owned ships remain banned from transiting the region.
However, while the ceasefire is a step in the right direction, major carriers like Maersk and Hapag-Lloyd are being cautious. Safety concerns and high insurance premiums remain key factors in deciding when, or if, they will fully resume services. The reduction of war risk premiums, which have significantly raised insurance costs since late 2023, will also play a role in these decisions.
CMA CGM is taking tentative steps toward resuming operations, with some vessels already en route to the Suez Canal, but other major players like Maersk and Hapag-Lloyd have stated that it’s still too early to make any firm commitments. The phased return of services is expected, beginning with smaller vessels and gradually expanding as confidence in the region’s stability grows.
If Red Sea operations fully resume, shipping lines expect to regain significant capacity, potentially leading to reduced transit times and emissions. However, the influx of capacity could also bring down freight rates, as overcapacity continues to be an issue in global shipping. An estimated 500,000 FEUs of container slots could re-enter the market if the Red Sea route is fully resumed.
One of the biggest factors affecting the decision for carriers to fully return to the Red Sea is insurance. War risk premiums have spiked since December 2023, adding significant costs to vessels passing through the region. As premiums decrease, confidence in the Red Sea’s safety will likely increase.
As global shipping alliances restructure in February and seasonal trade fluctuations, including Chinese New Year, take place, the Red Sea’s reopening could play a pivotal role in reshaping shipping routes and costs. However, the key challenges remain: Will the ceasefire hold? Will shipping lines trust it enough to return fully? And how will the market adjust to the increased capacity?
In collaboration with the Global Shippers Forum (GSF), the Freight & Trade Alliance (FTA) and Australian Peak Shippers Association (APSA) continue to monitor developments in the region and advocate for the safety of global shipping. Stay tuned for further updates as the situation evolves.
