Red Sea trade disruption could last until next year, warns Maersk

Armed men stand on the beach as the Galaxy Leader commercial ship, seized by Yemen's Houthis, is anchored off the coast of Yemen.
Photo: Reuters

The disruption to global trade from ships not being able to use the Red Sea or Suez Canal for trips between Asia and Europe could last into next year, according to the chief executive of the world’s second-largest container group.

Vincent Clerc, chief executive of Denmark’s AP Møller-Maersk, said there was no sign of tensions easing after attacks by Houthi rebels in Yemen caused container shipping companies to divert their vessels around the Cape of Good Hope, adding time and cost to the transportation of goods.

“We can see that the situation in the Red Sea is not going to be shortlived, but will last at least into the second half of the year …  We are not very optimistic we will be going through Suez any time soon,” he told the Financial Times.

Costs for container shipping — the backbone of global trade — have jumped since the Houthi attacks began in mid-November while the increasing delivery time has caused supply chain issues for retailers and manufacturers.

Maersk said that volumes had been stronger than it expected in the first quarter of this year, which combined with the prolonged disruption in the Red Sea, caused it to lift its financial guidance for the current year. It now expects to make an operating loss of between zero and $2bn, having previously forecast a loss as big as $5bn.

“When we provided guidance, we had no clue whether [disruption in the Red Sea] would stay with us for weeks or last a long time. It now looks very likely that it will stay with us for longer. At the shortest, we would see trade resume on its old pattern late in this year,” Clerc said.

The Suez Canal handles 12-15% of global trade and 25-30% of container traffic. Container shipments through the canal were down 80%, notes The Asia Financial. Meanwhile, for LNG, the decline was even greater. The drop-off for dry bulk was smaller and crude oil tanker traffic was very slightly higher.

Spot container rates recorded their sharpest weekly increase of $500, affecting not just Asia-to-Europe shipments but also the non-Suez route to the US west coast, which has more than doubled.

…The net result of the war in the Gaza Strip. A local conflict is now leading to global consequences for world trade.

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