Red Sea attacks impacting global trade as more shippers ban the area due to Houthi militants

Trade disruptions starting to show as attacks by Iran-backed Houthis drive more shippers from the Red Sea

Global trade disruptions caused by the exodus of shipping companies from the Red Sea are beginning to show and expected to get worse as more major shippers reroute their vessels away from the area to avoid attacks from Yemen's Iran-backed Houthi militants.

Container xChange, a global platform for facilitating container leasing and trading, reported Wednesday that some of the main ports in Germany are posting significant week-on-week price increases, saying the interpretation is that the situation in the Red Sea has contributed to the surge.

"The market anticipates that especially in Europe – which is on the receiving end of import containers from the Middle East, India, southeast Asia and China – that container scarcity will lead to an increase in container prices and the market," Container xChange CEO Christian Roeloffs said in an analysis.

Roeloffs said there has been a consistent jump in the surge of freight rates, too, pointing to a Xeneta report indicating a spot rate increase of 20% to 30% on major East-West corridors.

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The impacts are already being felt after major shippers, including Hapag Lloyd, MSC, Maersk and BP, announced in the past several days they would be avoiding the Red Sea due to the attacks.

Now, the situation is set to escalate further after Greece advised its shippers to avoid the Red Sea and the Gulf of Aden, given that Greek shipowners control around 20% of the world's commercial vessels in terms of carrying capacity.

In reaction to the news, maritime industry expert John Konrad wrote on X that the "move by Greece isn't just a national decision; it's a ripple effect that will be felt across international waters, influencing global trade routes, energy supply, and even food security."

Containter xChange warned clients in an advisory issued Monday that costs will surge for Europe-bound energy supplies, palm oil and grains as the operational costs shoot up and eventually get passed on to the consumer. Roeloffs wrote, "Now the shares of shipping lines have jumped in anticipation of a post-COVID disruption revival."

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Roeloffs said the key question for the industry is the duration of the current situation. Is it a temporary disturbance, "a perceived bump in the road," or are carriers capitalizing on the situation as container vessels are diverted around the southern tip of Africa, adding strain due to the Suez Canal's inaccessibility?

Defense Secretary Lloyd Austin on Tuesday announced the creation of a new international mission working to counter attacks by Houthi rebels on commercial vessels in the Red Sea. The security initiative, dubbed Operation Prosperity Guardian, involves multiple countries, including the U.K., Bahrain, Canada, France, Italy and others.

Meanwhile, a Houthi official told Reuters the group will continue to attack ships in the Red Sea as long as Israel continues its fight in the Gaza Strip. The official also said that only Israeli ships or those going to Israel will be targeted.

Roeloffs said the lingering question is when naval forces, particularly from Egypt, Great Britain, France and the U.S., will take control of security in the Red Sea.

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"Industry sources suggest that this task might not be straightforward," he said. "Forming convoys could impede traffic, and addressing drone boat attacks poses challenges, especially considering the difficulty of detecting these boats in high-traffic areas like the Red Sea."

Reuters contributed to this report.

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