Global shipping is currently beset by a range of disruptions, from the targeting by Houthi rebels of merchant vessels transiting the Red Sea and the return of piracy off the coast of Somalia, to costly diversions caused by migrant boats leaving west Africa for Europe. Adverse weather conditions are also taking their toll, as seen with significantly reduced vessel traffic through the Panama Canal because of drought.
However, the message from the recent Global Shipping Report 2024 webinar, presented by Inchcape Shipping Services and maritime risk management agency Ambrey, was don’t panic, build a trusted data network and do a thorough risk assessment.
Shipping through the Suez Canal, Gulf of Aden and Red Sea have been disrupted following the conflict between Israel and Hamas fighters in Palestinian Gaza, which began on October 7 when the Islamic organisation launched an attack into Israel. Ambrey has recorded 885 air raid alerts in port cities along the trade lane since then, with 98% of those alerts from Ashkelon and Ashdod.
In support of the Palestinians in Gaza, the Houthi political and military group based in Yemen also started to target Israeli territory from October 19 with long-range, unmanned aerial vehicles (UAVs) and missiles. According to Ambrey’s associate director of risk analytics, Robert Peters, the attacks initially caused significant business disruption, with port calls to Eilat falling considerably as a result. Those attacks were intercepted by Israel, Egypt and the US (and Saudi Arabia in once instance), and they have been dramatically reduced since the military resources of Hamas and Palestinian Islamic Jihad have been largely exhausted by the Israeli Defence Force. As a result, the risk to vessels calling at Ashkelon and Ashdod has reduced considerably. That led the Houthis to refocus efforts from November 14 on targeting merchant shipping affiliated with Israel.
On November 19 the pure car and truck carrier (PCTC) Galaxy Leader, chartered by NYK Line, was hijacked by Houthi rebels en route to India from Turkey. The Houthis claimed the ship was linked to Israeli shipping and Ambrey confirmed that the vessels commercial management company Ray Car Carriers is listed as a subsidiary of Abraham Rami Ungar, a company domiciled in Israel.
Escalation of attacks
The attacks on merchant vessels extended on December 10 when the Houthis started targeting companies trading with Israel, not directly owned, operated or managed by Israeli companies. In response to the threat on merchant shipping at large, on January 11 this year, the US and UK launched attacks on Houthi military targets. Subsequently, the Houthis started targeting US and UK shipping and that has continued until today, according to Peters.
According to Ambrey data, up to January 22 at least 28 merchant vessels were threatened, but fewer than half were damaged or seized.
“The percentage of damaged or seized vessels has not changed significantly since the US and UK air strikes on Houthi military targets,” said Peters. “So, although the US and UK have degraded the Houthi targeting capability, the efficacy of the targeting has not fallen significantly.”
As reported in Automotive Logistics’ Red Sea blog, Container xChange has issued a critical advisory as disruption continues and container demand surges. The advisory platform said there is a growing demand for containers in Asia as shippers and forwarders foresee cargo demand in the coming weeks.
There has been a 38% decline in vessels transiting the Suez Canal in January this year, according to Inchcape Shipping Services, but there continues to be regular traffic through the strait. Inchcape reports that between 40-50 vessels are moving through the canal on a daily basis. Chinese, Russian, Greek, Singaporean and Turkish shipping are highly unlikely to be impacted by transit through the Suez Canal, according to Peters.
“There are a lot of vessels trading through the Red Sea and out and around Aden,” said Inchcape’s vice-president of sales excellence, Ian Wilkinson. “There are 50 ports between Suez and the Yemen coast, including those in Egypt, Israel, Jordan, Saudia Arabia and Sudan.”
Risk management
Ambrey’s advice to those vessels is to conduct detailed risk assessments and adhere to the recommendations. “Those risk assessments should consider the operations needed onboard that ship to continue its voyage, and if there is any non-essential work on deck, do not do it in high-risk areas,” said Peters.
Peters added that even if there is a prolonged ceasefire or the conflict does come to an end, the threat to Israeli-affiliated shipping will continue given the anti-Zionist rhetoric coming from the Houthis.
“There is popularity amongst some elements in Yemen for the Houthis and for targeting Israel-affiliated merchant shipping,” he said. “We have also seen their backers in Iran continue to target merchant shipping for the last few years.
Iran has been targeting vessels for two main reasons. The first is related to US sanctions, as seen last year when the US seized the Iranian oil tanker Suez Rajan and issued a multimillion dollar fine. In response Iran seized a tanker carrying the US-bound cargo and harassed other US merchant shipping. They then later retook the former Suez Rajan.
“This kind of sanctions-related tit-for-tat has been ongoing since July 2019 when the British seized Iranian cargo off Gibraltar,” noted Peters.
Iran’s targeting of Israel-owned merchant shipping has been ongoing since February 2021 as part of a ‘grey zone’ conflict between the two countries.
Navigating the Cape
Vessels that are rerouting to avoid the danger in the Red Sea are doing so around Africa’s Cape of Good Hope, something that container vessels having been doing for some weeks and, according to Inchcape, there were between 140-150 vessels using the route as of last week.
Wilkinson pointed out that that rerouting brought with it complications for additional vessel husbandry and bunkering, but services and capacity are already available at ports in Gibraltar, Algeciras, South Africa and at Port Louis in Mauritius. Inchcape advises booking the bunker well in advance, as Algeciras and Gibraltar are busy ports.
“In Algeciras and Gibraltar, typically you are going to see between 10-20 vessels arriving within any 24-hour period and there is a comparative number departing,” said Wilkinson.
“Container turnaround time at Algeciras is 16 hours at the moment. Tankers are 22 hours. Gibraltar is similar, around about 22-23 hours turnaround. Clearly there is a lot of traffic going through there.”
Return of piracy
Moving up the west coast of Africa also has its own complications, with the return of piracy of the coast of Somalia. Pirates boarded the Lila Norfolk in January and hijacked the Ruen the previous December, lessons for those companies that do not apply the best management practices outside of insurance-listed areas, according to Peters. He added that point defence vessels were essential because merchant vessels can wait for anywhere between 24-48 hours for navy vessels to arrive in what is a vast area of ocean.
In terms of the type of vessel attacked Peters said that bulkers, such as the Lila Norfolk and Ruen, have reported more incidents. However, he added that disruption to tankers has gone unreported, largely because the operators do not want to report those incidents to their charterers.
Peters also said that incidents of hijacking vessels and kidnapping of crews are minimal and likely to diminish as a by-product of geopolitics in the Middle East and the impact on the oil market.
“Maintaining a higher oil price could lead to a dis-incentivisation of west African piracy,” he said. “There is a correlation between higher oil prices and lower piracy levels. The pirates can make more money as organised crime groups protecting the export of illicitly refined products than they can from kidnapping crew members.”
Migrant diversion
Shipping off the west coast of Africa and up into the Mediterranean is also subject to disruption from vessels carrying migrants. When alerted to a migrant vessel, merchant vessels divert to rescue those onboard. That incurs higher fuel cost and can impact the number of days the vessel is hired as well as risking a failure to fulfil contractual obligations at the next port of call, according to Peters.
“The average impact on a merchant vessel responding to one of these events is $500,000,” he said. “There is also reputational damage if they don’t respond… or return migrants to countries they are fleeing, such as Libya and Tunisia.”
There is also the question of crew safety. Most merchant vessels are crewed by between 10-30 people but they are not equipped to deal with the numbers of people packed into the fishing boats used to illegally transport migrants.
“There can be hundreds of people on fishing boats, which are unseaworthy,” said Peters. “Managing their safety is difficult especially if [the merchant vessels] are going to countries that are threatening to migrants. There are threats of self-harm and harm to crew members. Military support is then needed to support the merchant vessels.”
Climate impact
Weather events also continue to present problems for global shipping. Port Louis in Mauritius has been closed on and off for the past few weeks because of cyclones that have made it difficult to berth, according to Wilkinson. Over in the US meanwhile, terminals at the port of Houston were closed on January 15 because of ice caused by record-breaking cold weather in the US.
The Panama Canal has been affected by drought conditions for several years and two additional sets of locks have been installed to maintain vessel traffic. However, Wilkinson said growth in the number of vessels looking to transit the Panama Canal came at the same time as a dramatic drop in water levels, which has led to a critical situation. It has already forced Maersk to set up a land bridge to mitigate disruption there.
“In July last year [the Panama Canal Authority] brought in Condition 3 reduced capacity, down to 32, of which 27 were available for rebookings, he said. “They have had to reduce it further and bookings are now down to 24 a day, which is about half what it was before.”
According to Wilkinson there are currently 57 vessels waiting to cross the Panama Canal, 43 of which are prebooked. Smaller vessels have the opportunity of piggy-backing with bigger vessels.
Wilkinson said restrictions on passage across the Panama Canal will continue for some time but he said the market has adapted and transit costs are around $300,000-$400,000. “Whenever there is a slot there is an auction,” he said.
Vessel operators have had the option of transit through Chile’s Magellan Straits since 2021 when drought conditions began to impact the Panama Canal. There has been a steady increase of vessel traffic through the strait in 2023, though Wilkinson said it was a complicated passage, with a number of transit areas.
“You need to pick up two to three pilots as you transit and if you are not stopping in Chile you have to return the last pilot,” he noted.
Preparation for better performance
Other factors that have affected maritime shipping include civil disturbance such as has impacted Ecuador and Papua New Guinea. In January Ecuador instigated a 60-day national state of emergency following a surge in violence linked to drug gangs. Papua New Guinea also declared a 14-day state of emergency in January this year following widespread rioting in the capital Port Moresby.
Strike action has hit ports in Australia and France, both of which caused severe delays to shipping. According to Reuters, Australia’s industrial relations minister met representatives of port operator DP World and the Maritime Union of Australia on January 18 but refused to intervene in a workplace dispute that has hit throughput at major ports across the country since October last year.
In France members of the Dockers and Port Staff Union have voted to take strike action in protest against government reforms to the age of retirement for workers.
Narcotic smuggling is also a major problem with large consignments of cocaine being discovered almost daily around Europe, Malaysia, Indonesia and China, according to Wilkinson.
In the face of these disruptions Wilkinson said it was important not to panic and have faith in the ability of the shipping industry to adapt.
“If Israeli, UK or US cargoes are unable to go through Suez… chances are they will go to China or find another route,” he said. “The market will adapt. Those trends will become clear in a short time.”
Inchcape’s recommendations are to build a network of trusted data experts who can advise and conduct thorough risk assessments. Wilkinson flagged up the five Ps – perfect preparation prevents poor performance. “It’s about planning and thinking about what might go wrong and then training your mariners,” said Wilkinson. “There is no replacement for forethought. Do consider all possibilities and activities that may happen on your voyage and work with your trusted information and service providers to fulfil on that.”
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