Global News Container shipping market continues to be reset by ongoing Red Sea crisis

It is now more than nine months ago that the Red Sea crisis began with the hijacking of the car carrier Galaxy Leader. The crisis caused a major reduction in available container vessel capacity and is the core reason for the huge jump in freight rates this year, superseded only by the pandemic.

It might be time to take stock of the situation, as well as consider what lies ahead.

The fact of the matter is that more than 100 merchant vessels have been attacked. At least 39 have been hit and sustained some level of damage. This is a cadence of more than two attacks every week on average.

Two vessels have sunk due to attacks. The Galaxy Leader remains hijacked by the Houthi militants operating in Yemen. And in this context, it would be relevant to include the MSC Aries container vessel that was seized by Iran given the conflict’s underlying political motivations.

The attacks have, as is well known, caused the major container lines to divert their services to go around southern Africa. But it does not mean everyone has dropped the Red Sea transits. It has instead created a market opportunity for smaller, regional carriers to tap into a market the main carriers no longer serve.

As an example, we now see Asia to Europe services via the Red Sea offered by FESCO, NewNew Shipping, CU Lines and SeaLead, just to mention a few. We also see carriers such as X-Press Feeders, Unifeeder and Asyad operate vessels serving the Red Sea region to and from Asia while transiting the southern the Red Sea.

CMA CGM is operating its Asia-Med service called the “Phoenician Express” using the Suez routing and has been doing so for a long time. The carrier is also on occasion transiting other vessels through the Suez, such as the Jules Verne on the MEX service, which went through the canal on Aug. 20. This, however, might be seen more as a political statement demonstrating France’s naval ability to protect a French vessel. One might argue that if this routing was economically attractive also weighted against the risk, then presumably CMA CGM would be routing more vessels in this direction. Advantage for niche carriers Commercially, this means that these many niche carriers have a clear competitive advantage in this specific — and lucrative — market. The longer the Red Sea crisis lasts, the more we will see these carriers solidify not only their financial position but also their customer relations in the region. This provides them with a stronger platform for competing in the wider intra-Asia market when the crisis is eventually resolved.

But it is not just niche container lines that continue to operate through the risk area. A look at vessels signaling their location using AIS signals shows that on Aug. 27, there were 61 vessels inside the risk areas in the southern Red Sea and Gulf of Aden, including 16 container vessels. And this does not include vessels that shut off their AIS transmitters when going through the area.

Apart from the risk to the crews — three seafarers have so far lost their lives in the past nine months — and the risk to the vessel and cargo, there is a large risk to the environment. This is amply demonstrated by the attack on the Sounion oil tanker, which at the time of writing remains afloat but is at risk of becoming the fifth-largest crude oil spill from a tanker in history if its 1 million barrels of oil spill.

This raises yet another question: What is the ethical responsibility of not only ship operators but also of the shippers? In the case of ship operators, it boils down to choosing whether to send one’s vessels around Africa. In the case of shippers, it boils down to which carriers you choose to send cargo with — and in the case of container shipping, there is indeed a choice as services both around Africa and via the Red Sea are possible, albeit the capacity on the latter is somewhat limited.