Shippers declare Force Majeure as Red Sea attacks continue
Shipping majors Hapag-Lloyd and CMA CGM have decided to declare Force Majeure on sailing the Red Sea. Hapag-Lloyd’s vessel Al Jasrah, has recently come under attack by the Houthi militia, prompting the company to make the decision.
“Fortunately, the crew was not injured, and the vessel could continue its journey. As we see it today, the situation around the Suez Canal and the Red Sea is unsafe and the risks for our crews onboard are unacceptable,” the company said in its statement.
The company will route its ships around the Cape of Good Hope and has pledged to reassess the situation regularly, and should it change for the better it will reinstate its services through the Suez Canal.
Hapag-Lloyd is not the only company taking this step as other leading shippers like CMA CGM, Maersk, and MSC temporarily halted transits through the Suez Canal, which is transited by about 12 per cent of the world shipping traffic.
CMA CGM noted that it has taken preventive measures to ensure the safety of its crews and vessels. Maersk has made the same decision following an attack on one of its vessels, Maersk Gibraltar.
Read also: Red Sea crisis pushes freight rates skywards
“Having monitored developments closely and retrieved all available intelligence, Maersk has decided that all vessels previously paused and due to sail through the region will now be re-routed around Africa via the Cape of Good Hope for safety reasons. They will continue their voyages on the diverted routes as soon as operationally feasible and we will update customers on the latest details when we know more,” Maersk said in its statement.
For any future vessels that plan to sail through the area, a case-by-case assessment will be conducted to determine if adjustments are necessary. This may include diversions through the Cape of Good Hope and other contingency measures.
“The Red Sea, especially with the Suez Canal, is like a superhighway for shipping containers, connecting different parts of the world, particularly Europe, Asia and Africa. However, recent disruptions are poised to escalate operational costs, adding significant strain, while concurrently exerting downward pressure on profits. It marks a disheartening beginning to the strategic planning for the year 2024,” said Christian Roeloffs, cofounder and CEO, of Container xChange.
Escalating situation and its effect
“The situation in the Red Sea has been escalating quite significantly over the last two weeks where Houthi rebels have started to attack the commercial vessels by the big ocean liners. Subsequently, the container liners are essentially instructing their vessels to avoid transiting through the Suez Canal and around the Cape of Good Hope adding quite a significant delay and time to their East to West trade journeys,” said Roeloffs.
According to Reuters, several vessels have switched off their AIS in an attempt to mask their position and avoid attacks.
In a summary, Matthew Costello, CEO at Voyager Portal said, that the crisis is already already putting upward pressure on the cost of transporting raw materials like oil, gas, petrochemicals, and grains around the world. “Charterers of these vessels and their operators have a few options up their sleeves depending on their financial objectives and risk tolerance,” he said.
Furthermore, he said that in practice, deviating vessels around Africa will increase the duration of the voyage, fuel costs, cargo financing costs and insurance costs. “Overall the cost PMT could easily increase by 50 per cent for the Charterer depending on the opportunism of the vessel operator and the contract provisions in the Charter Party,” Costello said.
He also expects War Risk Premiums to be levied by insurance providers for those taking the risk of travelling through the Gulf of Aden.
“In short, freight rates are going to keep going up so long as the crisis continues and this will eventually be priced into the commodities themselves. For the consumers, it’s unlikely to have a major impact in the near term price since increases in raw materials can take months or years to hit the shelves of the supermarket. Fuel markets may hit quicker,” according to Costello.
Operation Prosperity Guardian
Furthermore, to help vessels transit, Operation Prosperity Guardian was launched on Tuesday. It is a multinational security initiative under the umbrella of the Combined Maritime Forces and the leadership of its Task Force 153, which focuses on security in the Red Sea.
Operation Prosperity Guardian brings together the United Kingdom, Bahrain, Canada, France, Italy, Netherlands, Norway, Seychelles and Spain, to jointly address security challenges in the southern Red Sea and the Gulf of Aden, to ensure freedom of navigation for all countries and bolster regional security and prosperity.