Red-Sea Attacks To Stop, But What’s Next?

It has been confirmed this week by various media sources that Houthi Rebel attacks on commercial shipping in the Middle East are to cease, with the exception of Israeli owned vessels or those that fly the Israeli flag.

The other exception of note was the declaration that  in the event of any aggression against the republic of Yemen by the US, the UK, or Israel, they will resume attacks on US/UK vessels.

These attacks started over a year ago and led to major disruption in ocean freight movements between Asia and Europe when ocean carriers had to begin rerouting vessels around the Cape Of Good Hope.

Not only did this add 10-12 days to every journey, but it also left steamship lines desperately short on vessels and container equipment to cover the additional rotation needs, leading to a lack of space and freight rate chaos.

So, the next logical step, following the Houthi announcement, would be for vessels to return to the shorter journeys through the Suez Canal, although that is probably unlikely in the immediate future.

Of course, trust needs to be built up in the Houthi’s intentions before vessel operators take the risk and, perhaps even more significantly, the majority of carriers now have too many vessels in service for the shorter route.

Every service loop needed 1-2 more vessels to cover the additional journey times around Africa, which meant that carriers were scrambling for capacity last year, with new ships and charters making up the shortfall.

Therefore, an immediate return through Suez would likely lead to overcapacity and rates crashing, which is clearly not in the best interest of the alliances.

Even if the Houthi ceasefire holds, it may be some time before we get back to shorter journeys, although sometimes its just takes one carrier to break ranks. Atlantic Pacific is monitoring developments with great interest.