Red Sea disruptions effecting Australia-Europe Trade

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18 Dec 2023

Updated 21.12.2023

Red Sea disruptions effecting Australia-Europe Trade

Due to the significance of these developments, IFCBAA has overnight and today worked with MPC International to collaborate on producing this important update to members and industry.

This update has been produced in the form of the enclosed Media Release, which members can also use for both theirs and their customer’s reference, should they choose to do so.

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Source: IFCBAA


MSC, CMA CGM, Maersk, and Hapag-Lloyd have all paused their vessels transiting the Red Sea and are rerouting via the Cape of Good Hope as Houthi militia step up attacks on commercial shipping, adding 10+ days to transit times.

As a result of the attacks in the Red Sea, several major global shipping companies have suspended passage.

On Friday,  two of the world's largest shipping companies, Maersk and Hapag-Lloyd, called off passage through the sea until further notice. 

"Following the near-miss incident involving Maersk Gibraltar yesterday and yet another attack on a container vessel today, we have instructed all Maersk vessels in the area bound to pass through the Bab al-Mandab Strait to pause their journey until further notice," the company said in a statement.

Maersk on Thursday said its vessel Maersk Gibraltar was targeted by a missile while travelling from Salalah, Oman, to Jeddah, Saudi Arabia and that the crew and vessel were reported safe.

The Maersk Gibraltar was targeted but all crew were reported safe.(Reuters: Jon Nazca, file)

On Saturday, French Container Shipping company CMA CGM and the Mediterranean Shipping Company followed suit. 

"The CMA CGM Group is deeply concerned about the recent attacks on commercial vessels unfolding in the Red Sea Region," it said in a statement posted to its website.

"We have been taking over the past days increasing prevention measures to ensure the safety of our vessels and their crews navigating these waters.

"The situation is further deteriorating and concern of safety is increasing."

MSC, one of the world's largest freight shipping lines, said one of its container vessels had been targeted in the Red Sea on Friday and it was halting traffic through the strait until it was safe. 

These companies ship food, clothing, chemicals and pharmaceuticals as well as industrial machinery and refrigerated and oversized goods. 

The importance of the Red Sea

The Red Sea is one of the most travelled waterways in the world, connecting to the Mediterranean Sea via the Suez Canal.  

According to AP, about 10 per cent of the world's trade passes through the Red Sea. 

A huge amount of Europe's energy supplies as well as food come through the waterway. 

However, the global oil market has shrugged off the most recent attacks.

Prices have fallen and the market is more worried about weak demand in major economies.

Negative effects on trade 

The Australian Peak Shippers Association and Freight and Trade Alliance have released a statement about the implications for Australia the suspension of shipping in the Red Sea will have. 

"Although this predominantly affects ships serving the Asia to North Europe and Mediterranean routes, recent experience has shown there will be serious impacts in other regions if the situation escalates or lasts for a prolonged period," it read. 

FTA Director Paul Zalai drew comparisons to March 2021 when a ship ran aground in the Suez Canal. 

"The impact of the waterway closure for 6 days threw vessel schedules internationally into disarray — this may fade into insignificance compared to the current conditions that are likely to continue for a significant period with other shipping lines likely to follow, understandably not wanting to endanger the lives of seafarers, the safety of vessels and the cargoes they carry," he said.

Paul Zalai said the Red Sea might have to be abandoned by shippers. (Supplied: Paul Zalai)

"We are likely to know more in coming days — should marine insurers withdraw policies for ships passing through the area or declare the Red Sea a 'war zone', shipping lines will be commercially left with little option but to abandon this key waterway."

He said diversions could add 10 days to transit times and estimated arrival dates in North Europe and Mediterranean ports.

"We can expect that shipping lines will recover these costs through additional surcharges and cargoes."

In an Australian context, Mr Zalai suggests any prolonged closure will add to the costs of goods, already under pressure from the effects of wider inflation, especially if it flows to the supply of oil and natural gas.

According to Vessel Protect, which assesses war risks at sea and provides insurance, the single biggest immediate impact of the Houthi escalation has been increased insurance costs.

Consultancy S&P Global estimated that the detour would increase the distance between Rotterdam in the Netherlands and Singapore by 40 per cent.

Source: ABC News Australia

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