Hapag-Lloyd Says Red Sea Route Still Too Dangerous

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Shipping giant Hapag-Lloyd AG said it will keep its vessels away from the Red Sea even after the launch of a U.S.-led taskforce to protect the key trade route from militant attacks. 

The container liner said it will continue to reroute its vessels via the Cape of Good Hope, a detour of several thousand miles. It follows a spate of attacks on merchant ships — by Yemeni rebels acting in support of the Palestinians — on a route that handles about 12% of global trade. 

The incidents have struck everything from oil tankers to container vessels, pushing shipowners to avoid the route. That means delays and extra costs that could ultimately hit consumers. 

Spot rates for container shipping have jumped 26% over the past four weeks and “are likely to remain in a heightened state” as long as voyages continue to be diverted, according to a Bloomberg Intelligence research note on December 27. Oil prices have risen since the attacks stepped up, though traders are still not pricing in major disruptions.

The U.S.-led Operation Prosperity Guardian got underway last week with the aim of containing a threat to global trade that’s been triggered by the war between Israel and Hamas. Yemen-based militants say they are acting in support of the Palestinians and initially were targeting ships with Israeli links. But U.S. officials — and their allies in the region — are wary of causing an escalation in the conflict by too heavy-handed a response.

There’s been little sign of a let-up in attacks in recent days, and a container ship known as the MSC United VIII was hit on Tuesday. 

For some companies, the taskforce has provided reassurance. A.P. Moller-Maersk A/S, the world’s second-largest container line, said on December 24 it is preparing to resume shipping through the Red Sea, and will deviate from the policy only on a “case-by-case basis.”

Read More: Maersk Prepares to Resume Shipping through Red Sea

Still, “the overall risk in the area is not eliminated completely,” spokesperson Adhish Alawani said in emailed comments. Maersk “will not hesitate to re-evaluate the situation and once again initiate diversion plans if we deem it necessary for the safety of our seafarers.”

Another liner, CMA CGM, also said on December 26 it was devising plans to gradually increase the number of ships it sends through the Suez Canal. 

Some vessels have been considering transiting the Red Sea at night in order to avoid drone attacks. Advice given to shipping at the start of Operation Prosperity Guardian said that drones have generally been active during daylight hours, and it may be harder for seaborne attacks to hit vessels at night. 

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