Commentary

By Lars Jensen

Major carriers avoiding the Red Sea has created a market opportunity for smaller , regional lines .

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It is now more than nine months ago that the Red Sea crisis began with the hijacking of the car carrier Galaxy Leader . The crisis caused a major reduction in available container vessel capacity and is the core reason for the huge jump in freight rates this year , superseded only by the pandemic .

It might be time to take stock of the situation , as well as consider what lies ahead .

The fact of the matter is that more than 100 merchant vessels have been attacked . At least 39 have been hit and sustained some level of damage . This is a cadence of more than two attacks every week on average .

Two vessels have sunk due to attacks . The Galaxy Leader remains hijacked by the Houthi militants operating in Yemen . And in this context , it would be relevant to include the MSC Aries container vessel that was seized by Iran given the conflict ’ s underlying political motivations .

The attacks have , as is well known , caused the major container lines to divert their services to go around southern Africa . But it does not mean everyone has dropped the Red Sea transits . It has instead created a market opportunity for smaller , regional carriers to tap into a market the main carriers no longer serve .

As an example , we now see Asia – Europe services via the Red Sea offered by FESCO , NewNew Shipping , CU Lines and SeaLead , just to mention a few . We also see carriers such as X-Press Feeders , Unifeeder and Asyad operate vessels serving the Red Sea region to and from Asia while transiting south of the Red Sea .

CMA CGM is operating its Asia –

Mediterranean service , called the “ Phoenician Express ,” using the Suez routing and has been doing so for a long time . The carrier is also on occasion transiting other vessels through the Suez , such as the Jules Verne on the MEX service , which went through the canal on Aug . 20 .

This , however , might be seen more as a political statement demonstrating France ’ s naval ability to protect a French vessel . One might argue that if this routing was economically attractive also weighed against the risk , then CMA CGM would presumably be routing more vessels in this direction .

Advantage for niche carriers

Commercially , this means that these many niche carriers have a clear competitive advantage in this specific — and lucrative — market . The longer the Red Sea crisis lasts , the more we will see these carriers solidify not only their financial position but also their customer relations in the region . This provides them with a stronger platform for competing in the wider intra-Asia market when the crisis is eventually resolved .

But it is not just niche container lines that continue to operate through the risk area . A look at vessels signaling their location using AIS signals shows that on Aug . 27 , there were 61 vessels inside the risk areas in the southern Red Sea and Gulf of Aden , including 16 container vessels . And this does not include vessels that shut off their AIS transmitters when going through the area . Apart from the risk to the crews — three seafarers have so far lost their lives in the past nine months — and the risk to the vessel and cargo , there is a large risk to the environment . This is amply demonstrated by the attack on the Sounion oil tanker , which at the time of writing remains afloat but is at risk of becoming the fifth-largest crude oil spill from a tanker in history if its 1 million barrels of oil spill .

This raises yet another question : What is the ethical responsibility of not only ship operators but also of the shippers ?

In the case of ship operators , it boils down to choosing whether to send one ’ s vessels around Africa . In the case of shippers , it boils down to which carriers you choose to send cargo with . And in the case of container shipping , there is indeed a choice as services both around Africa and via the Red Sea are possible , albeit the capacity on the latter is somewhat limited .

email : lars . jensen @ vespucci-maritime . com

60 Journal of Commerce | September 23 , 2024 www . joc . com