Houthi Cutting Off Red Sea Shipping Route... Growing Fear of Logistics Crisis

Repeated Indiscriminate Attacks on Civilian Ships
Global Shipping Companies and Oil Firms
Decide to Halt Navigation and Choose Detours

The Houthi Islamic rebels in Yemen have been repeatedly attacking civilian vessels in the Red Sea, a major route connecting Asia and Europe, raising concerns about a global logistics crisis.

According to the Wall Street Journal (WSJ) on the 18th (local time), as indiscriminate attacks on civilian ships passing through the Red Sea have expanded, global shipping companies and oil firms have decided to suspend navigation in the Red Sea or take detours, causing ongoing logistics disruptions. British Petroleum (BP), the largest oil company in the UK, temporarily suspended operations on the Red Sea route on the same day, while Maersk, the world's second-largest shipping company, had earlier decided on the 15th to halt transportation through the Bab el-Mandeb Strait at the entrance to the Red Sea.

[Image source=AFP Yonhap News]

Swiss MSC, French CMA CGM, and German Hapag-Lloyd also announced that they would choose detours around the African continent until complete safety is secured. BP stated in a press release that "due to the deteriorating security situation on the Red Sea route, we have decided to temporarily suspend all transportation passing through the Red Sea route."

The Suez Canal?Red Sea route, a key passage connecting Europe and Asia, accounts for about 30% of the world's container ship cargo volume and 10?15% of bulk cargo volume such as crude oil and natural gas. With this section paralyzed due to threats from the Houthi rebels, increases in logistics costs and transportation delays are inevitable. If ships cannot pass through the Red Sea and must detour around the African continent, transportation time will increase by about 15 days to a month.

Daniel Harid, senior analyst at international credit rating agency Moody's, pointed out, "If this paralysis continues for more than a few days, it will have a positive impact on the credit ratings of container and bulk shipping companies due to rising maritime freight rates, but at the same time, additional supply chain disruptions will be unavoidable."

The Houthi rebels, who support Hamas, have been carrying out indiscriminate attacks on civilian vessels passing through the Red Sea since last week, claiming to respond to Israel's attacks on the Gaza Strip. So far, the targets have mainly been large cargo ships such as Maersk's cargo ship Maersk Gibraltar and MSC's Palatium 3.

Since the Houthi attacks, maritime freight rates have been rising. After the outbreak of the Israel-Hamas war, maritime freight rates connecting Asia and the U.S. East Coast rose 5% to $2,497 per container compared to before the war. As major shipping companies choose to avoid the Suez Canal route and detour around Africa, freight rates are expected to rise further. CNBC explained that using the detour route adds up to 14 days to transportation time and increases fuel costs.

International oil prices are also rising amid expectations of disruptions in crude oil transportation. On the same day, the closing price of West Texas Intermediate (WTI) crude oil futures for February delivery on the New York Mercantile Exchange was $72.47 per barrel, up $1.04 (1.46%) from the previous trading day's closing price. Highlighting the risks of the Red Sea route, WTI futures prices bottomed out at $68 per barrel on the 12th and have been on a rebound since last week.

This content was produced with the assistance of AI translation services.