Tensions in the Red Sea could disrupt international shipping

Yemeni Houthi armed forces said on December 15 local time that the organization fired missiles at the container ship "Alanya" and "Paratium 3" bound for Israel. The U.S. Central Command said that Houthi drones also hit the Liberian-flagged ship "Jassra" in the Bab el-Mandeb Strait in the southern Red Sea on the same day.

A few days ago, a number of merchant ships were attacked, increasing tensions in the Red Sea, following the 15 shipping giants Maersk and Hapag-Lloyd, 16, and two important shipping companies - Mediterranean shipping and CMA CGM announced that due to Yemen Houthi armed attacks in the relevant areas, they will suspend sailing through the Red Sea Strait.

Oocl announced that due to operational issues, it will immediately stop receiving shipments to and from Israel until further notice.

The International Chamber of Shipping condemned the Houthi attack, saying it "threatens the lives of innocent seafarers and the safety of merchant ships". The agency noted that diverting shipping between Europe and Asia from the Red Sea via the Cape of Good Hope in South Africa would increase costs and cause delays. S&p Global, a consultancy, estimates the detour will increase the distance between Rotterdam in the Netherlands and Singapore by 40%.

Mediterranean Shipping, the world's largest shipping company, said one of its container ships was attacked in the Red Sea on Monday and that it would suspend operations in the Bab el-Mandeb Strait until it was safe to do so.

Cma CGM said it had ordered all its vessels to leave the area and stay until further notice. "The situation continues to deteriorate and there are increasing security concerns," the company said.

Danish container shipping company Maersk previously said all its vessels in the region bound for the Bab el-Mandeb Strait would be suspended until further notice. In addition, German sea carrier Hapag-Lloyd will suspend all container ship traffic through the Red Sea until Monday (December 18), and will make a decision in the period thereafter.

Marsky's Danish shares jumped 7.9 percent and Hapag-Lloyd's German shares jumped 16.4 percent on expectations that disruptions to shipping will help reduce oversupply of shipping capacity.

The Bab el-Mandeb Strait, which connects the Red Sea and the Gulf of Aden, is of strategic importance. An Israeli-Palestinian conflict would disrupt global supply chains that pass through the Red Sea and the Suez Canal, which accounts for 30 percent of global container shipping and is a key waterway for crude oil shipments.

The conflict comes at a difficult time for the global supply chain, with drought in the Panama Canal already causing significant delays to shipping and disruption to the Red Sea route, hitting all parts of the supply chain from producers to end users and increasing the likelihood that critical goods will not reach their destinations in time for Christmas, said Director General of the Export and International Trade Association, Antonio Forcioni.