Fatal attack by Houthi rebels could be ‘red line’ in Red Sea shipping crisis

By | March 8, 2024

The first deadly attack on a commercial ship in the Red Sea since Iran-backed Houthi rebels began attacking ships late last year has exposed the enormous challenge of restoring safe passage along one of the world’s most important trade routes.

At least three crew members were killed and four others injured in Wednesday’s attack on the M/V True Confidence, a Liberian-owned bulk carrier that is one of several ships that carry dry cargo such as grain and iron ore.

The deadly attack marks a significant escalation in Houthi attacks on ships in the Red Sea and comes despite a US-led naval coalition to protect the crucial waterway. It also follows an attack late last month that sank a cargo ship, which is now dumping fertilizer into the ocean.

Fewer ships appear to be transiting the Red Sea and the adjacent Suez Canal after the latest attack, according to maritime risk analysis firm Windward. Transit traffic has already fallen significantly since December, when carriers began avoiding the area and rerouting ships around the southern tip of Africa.

The longer the disruption continues and the more ships are diverted, the greater the delays in the delivery of goods, raw materials and fuel, risking prices rising.

The number of bulk carriers anchored outside ports north and south of the Suez Canal rose 225% on Wednesday compared to the day before, according to Windward. “Our data shows that 61% of these (anchored) after 1:30 PM UTC (6:30 PM ET), which was the time of the attack,” Windward CEO Ami Daniel told CNN.

He expects the attack to lead to even greater numbers of bulk carriers avoiding the Channel, through which 10-15% of global trade and 30% of container trade passes. “The propensity for something to happen is greater than people thought and the severity of the impact, once something happens, is (worse) than people thought,” he added.

Windward data shows that the number of bulk carriers in the Red Sea was already at its lowest level in two years last month.

Oil tanker transits to fall

The Houthis have launched more than 45 missile and drone attacks on commercial as well as U.S. and allied naval vessels operating in the Red Sea, according to U.S. and other Western officials.

Most of these have been intercepted or landed harmlessly in the water, adding further shock to Wednesday’s attack that could give pause to shipping companies still plying the waterway.

“Maybe a red line has now been crossed in terms of casualties,” said Peter Sand, principal analyst at Xeneta, a Norway-based shipping analytics company.

Only 30% of the usual shipping capacity – including container ships, bulk carriers, car ships and tankers carrying oil and liquefied natural gas – still passes through the Red Sea and the Suez Canal, according to Sand.

“I expect the deadly attack to drop that level to a new low,” he told CNN. “It is mainly the oil tankers that are still on their way and that we can now expect to withdraw in larger numbers.”

At the very least, the attack makes it clear that it could take many months before the crisis is resolved.

That means major container shipping companies – including Maersk, MSC and Hapag Lloyd – will continue to send their ships on the much longer, more expensive route around Africa, keeping the costs of transporting goods high.

The threat that the regional crisis poses to the economy was highlighted on Thursday by European Central Bank President Christine Lagarde.

“Upside risks to inflation include heightened geopolitical tensions, especially in the Middle East, which could increase energy prices and freight costs in the near term and disrupt global trade,” she said.

Seafarers in ‘the front line’

Container shipping costs along some of the world’s busiest trade routes remain more than double what they were in December, according to data from London-based shipping consultancy Drewry.

French container shipping company CMA CGM said last week it would resume “part of the transit” through the Red Sea “on a case-by-case basis.” The company did not respond to a question from CNN about whether it plans to change its approach after the deadly attack.

On Wednesday, the International Transport Workers’ Federation renewed its call for the shipping industry to divert ships around the Cape of Good Hope until safe passage through the Red Sea can be guaranteed.

“We have consistently warned the international community and the maritime industry of the escalating risks facing seafarers in the Gulf of Aden and the Red Sea,” the organization’s secretary general, Stephen Cotton, said in a statement.

It could become more difficult to hire seafarers after the attack, Cotton told CNN, even though basic wages for many of those working in the Red Sea and Gulf of Aden in the southeast have already doubled following recent negotiating deals.

David Ashmore, employment lawyer at global law firm Reed Smith, echoed this view. “In a world struggling with maritime labor shortages, these safety issues add another layer of complexity to an already challenging task,” he said.

The incident “demonstrates what we have been saying since the beginning of the crisis, which is that the greatest impact is on seafarers,” said John Stawpert, senior manager for environment and trade at the International Chamber of Shipping.

“They are on the front lines… We always felt that it would only be a matter of time before the Houthis’ attacks reached this conclusion.”

Maisie Linford contributed to this article.

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