Houthi attacks on ships disrupt global trade

Washington: Houthi rebels on the Arabian Peninsula have been attacking cargo ships in the Red Sea since since Israel launched its military operation in Gaza Strip in October 2023. In a statement on Thursday evening, US President Joe Biden reported that there had been 27 attacks on ships to date. Numerous shipping companies have halted traffic through these waters as a result, and have redirected their ships to take the much longer route around the southern tip of Africa.

The Red Sea, which connects the Indian Ocean to the Mediterranean via the Suez Canal, is a vital trade route that facilitates up to 12% of global trade. The volume of freight on this crucial route has decreased significantly as a result of the Houthi attacks. According to the Kiel Institute for the World Economy (IfW), in December 2023 “[t]he volume of containers transported there plummeted by more than half and is currently almost 70% below

Julian Hinz, director of the IfW’s trade policy research centre, says that the rerouting of ships around the Cape of Good Hope “means that the time it takes to transport goods between Asian production centers and European consumers is significantly extended, by up to 20 days.”

As he explains: “This is also reflected in the declining trade figures for Germany and the EU, as transported goods are now still at sea and have not already been unloaded in the ports as planned.”

On Thursday, for example, the electric car manufacturer Tesla announced that it would be pausing production at its Grünheide plant in the German state of Brandenburg for two weeks from the end of January, citing a “lack of components.”

The German Shipowners’ Association (VDR) told DW that the current situation was resulting in “extended delivery times as well as increased emissions and higher costs for shipping companies.” However, the association was unable to provide an estimate of additional costs, saying these depended on “the highly individual circumstances of each ship, such as size, load, speed, fuel type and the manning of the ship.”

The German shipping company Hapag-Lloyd, ranked fifth globally, calculates that ships’ journeys will be extended by seven days on the route from the Far East to the east coast of the United States, and by up to 12 days for destinations in Northern Europe. The additional costs per month run into the high tens of millions of euros.

The world’s biggest shipping company, Maersk, from Denmark, explained to DW that the extra kilometers are always expressed in relation to a round trip, i.e. there and back. These, it said, amount to “approximately 10–12 days per voyage in one direction — i.e. a round trip of around three weeks — and up to 7,000 kilometres more,” increasing the cost of each passage by around 50%.

However, it appears that market participants have learned from the closure of the Suez Canal in 2021, the impact of the COVID-19 pandemic, and the fallout from the Ukraine war, and are now better prepared for crisis situations. German retailers, for instance, do not expect empty shelves in stores straight away. Stefan Hertel, spokesperson for the German Retail Federation (HDE), told news agency Reuters that visible shortages were not anticipated in either the short or medium term, and attributes this resilience to more robust supply chain management.

However, the situation may deteriorate over the coming weeks, especially during the Chinese New Year celebrations when China’s factories will close for between two and four weeks from February 10. Many customers are therefore trying to place orders in advance, but the rerouting of ships around South Africa may mean that some will be unable to get back to the People’s Republic on time. Observers have already reported a shortage of containers in the port of Ningbo.

This is confirmed by Maersk, which says that not only have the ships’ schedules been disrupted, so have those of the empty containers, which are needed back in Asia for reloading: “If there are no empty containers available, that’s a huge problem.”

A Maersk vessel was the target of a Houthi attack in mid-December, prompting the company to suspend traffic through the Red Sea “for the foreseeable future.”

Maersk CEO Vincent Clerc told the Financial Times: “It is unclear to us if we are talking about re-establishing safe passage into the Red Sea in a matter of days, weeks, or months.”

Hapag-Lloyd also currently has no intention of sending its ships back through the Red Sea and the Suez Canal. It said it would only do so “when the threat level changes from ‘severe’ to ‘not dangerous.’ As long as there are attacks, the transit is definitely too dangerous.”

The German Shipowners’ Association does not generally provide individual risk assessments: It says shipping companies must compile and take responsibility themselves.

However, it told DW that, following the recent security incidents, the association assumes “that the risk of an attack on civilian merchant ships in the affected maritime region is currently very high.”
International community must do what is necessary

Maersk CEO Vincent Clerk says the problem must be resolved as quickly as possible.

“We are urging the international community to mobilize and do what it needs to do to reopen the [Bab-el-Mandeb] strait,” he said. “It is one of the main arteries of the global economy, and it is clogged right now.”

The German shipping company Hapag-Lloyd is also very keen to see this maritime route protected. When asked whether it would welcome military involvement by the German government in securing the route, and whether it had communicated this wish to the government, its response was emphatic: “Yes, and yes!”

This aligns with the position of the shipowners’ association, which told DW that “other NATO partners such as the United Kingdom and France have already deployed naval forces to accompany and protect the ships of their nations. The VDR therefore considers German participation and regional support by the German navy in the ongoing mission to protect merchant shipping urgently necessary.”

The German government did express its backing for the military strike led by the United States, the UK, and other allies against Houthi positions in Yemen on Thursday night.

The following day, German foreign minister Annalena Baerbock declared: “The reaction has our political support.”

Speaking in Kuala Lumpur, Baerbock added that the US and other partners had specifically targeted Houthi infrastructure that had been used to attack shipping in the Red Sea, “in accordance with the individual and collective right to self-defense under the United Nations Charter.”

Asked how the German government intended to participate in securing shipping in the Red Sea, and when a decision would be made, Baerbock replied that German and European Union leaders were working to quickly determine “how we ourselves can strengthen stabilization in the Red Sea and can contribute to this stabilisation.”

The decision, she said, must be made jointly, within the European framework.