It has been widely reported this week that Houthi Rebel attacks on commercial shipping in the Red Sea area are to cease, with the exception of Israeli owned vessels or those that fly the Israeli flag.
The other stipulation of note was the statement that in the event of any aggression against the republic of Yemen by the US, the UK, or Israel, they will resume attacks on US/UK vessels.
The cargo ship targeting started over a year ago and led to major disruption in ocean freight movements between Asia and Europe when ocean carriers had to begin rerouting vessels around the Cape Of Good Hope.
This action added 10-12 days to every journey, but also left steamship lines desperately short on vessels and container equipment to cover the additional rotation needs, leading to a lack of space and freight rate chaos.
So, following the Houthi announcement, the next assumption would be that vessels return to the shorter journeys through the Suez Canal. However, this is probably unlikely in the immediate future.
Naturally, trust needs to be built in the Houthi’s intentions before vessel operators take the risk and, perhaps even more significantly, the majority of carriers now have too many vessels in service for the shorter route.
Every vessel loop needed 1-2 more ships to cover the additional journey times around Africa, which meant that carriers were scrambling for capacity last year, with new builds and charters making up the shortfall.
So, an immediate return through Suez would probably lead to overcapacity and rates crashing, which is clearly not in the best interest of the alliances.
Even if the Houthi ceasefire continues, it may be quite some time before we get back to shorter journeys, although sometimes its just takes one carrier to break ranks. Killick Martin is monitoring developments closely.
