CMA CGM Makes ‘Case-by-Case’ Red Sea Return, Maersk Says to Seek Alternatives
The Red Sea crisis is giving ocean carriers varying opinions on how or when to go about returning to the waterway.
In a service update Wednesday, CMA CGM said it has reevaluated the situation in the southern area of the Red Sea, concluding that the “evolving conditions allow us to resume transit on case-by-case basis.”
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The container shipping company said the situation is being closely assessed for each vessel before each transit. Therefore, routing choices cannot be anticipated or communicated.
All other vessels will still be rerouted via Africa’s Cape of Good Hope.
Of the liners that skipped the Red Sea, CMA CGM was the latest to commit fully to diverting its vessels on Feb. 1. Unlike the other major container shipping companies, the France-based firm had benefited from having the French Navy escort select vessels through the Red Sea since December amid concerns of lingering Houthi attacks.
After one of its charters was targeted and unharmed, and its schedules became further disrupted, the company suspended all sailings in the area through February.
Unlike CMA CGM, Maersk still hasn’t committed to sending any ships back through the Red Sea. In a market update on Tuesday, Maersk’s regional president for North America, Charles van der Steene, put the situation bluntly: “No one knows for how long the situation will last.”
Van der Steene advised shippers to seek alternatives to how they traditionally bring products into North America, listing off ports in Mexico, the Pacific Northwest, Los Angeles and Long Beach as possible substitutes for East Coast-bound freight.
“Start quantifying and preparing to mitigate shifts in your supply chain costs,” Van der Steene said. “Many customers factor a cost per unit into their budgeting, and if that fundamentally changes due to all of this volatility, it could have a big impact on overall costs.”
Although drone and missile attacks from the Iran-backed Houthis continue to persist, carriers appear to have more or less adjusted to their new normalcy from a pricing standpoint.
Despite freight rates hitting their highest point since October 2022 on Jan. 25, ocean spot rates have since declined 11.9 percent to $3,493 per 40-foot container, according to Drewry’s World Container Index (WCI).
While the rates seem to have stopped escalating, other costs have ballooned, including war–risk premiums, for those carriers still bold enough to pass through the conflict-ridden Red Sea.
Citing data from Moody’s Investors Service, the United Nations Conference on Trade and Development (UNCTAD) said in a report that these premiums rose from under 0.1 percent of a vessel’s total fell to between 0.7 percent to 1 percent—an increase of as much as 900 percent.
Cargo traversing the Suez Canal still registered significant drops in overall traffic for the week ending Feb. 18, coming in at 61 percent below normal levels, measured by deadweight tonnage. “Normal” levels in this case consist of the three-week average prior to Red Sea disruption in weeks 45-48 of 2023, according to data from Lloyd’s List Intelligence.
On a weekly basis, cargo surpassing the Canal was down 5 percent.
However, in the Red Sea itself, there may be some signs of stabilization. In the week to Feb. 18, commercial shipping traffic across vessel types through the Bab el-Mandeb Strait rose 7 percent.
The uptick was led by increased numbers of smaller container ships entering the regional market to replace suspended calls from larger lines, Lloyd’s List Intelligence said.
This marks the first week-on-week rise seen since the Houthi attacks on vessels transiting the Red Sea and Gulf of Aden escalated in December.
Although more ships may be braving out the journey through the Bab el-Mandeb as joint U.S. and U.K. naval forces continue striking Houthi targets in Yemen, the vessels are likely to endure more attack attempts throughout their journey.
“Our operations will continue with greater effectiveness in the Red Sea,” said Abdul-Malik al-Houthi, the Iran-backed group’s leader. Speaking in a broadcast address today he said, “We have a big surprise that the enemies do not expect, and we will indeed start it.”
At a Senate hearing on Tuesday, Dan Shapiro, the deputy assistant secretary of defense on Middle East policy for the Department of Defense, said the Houthis have conducted at least 48 attacks against commercial shipping and naval vessels in and around the Red Sea since Nov. 19.
“Despite the Houthis’ claims, these attacks are almost entirely unrelated to Israel and Israeli-affiliated shipping,” Shapiro said. “And to be clear, any such attacks would be entirely illegitimate anyway. These are indiscriminate acts that are as much an affront to maritime commerce as piracy, having affected the interests of more than 55 nations and threatened the free flow of commerce through the Red Sea—a bedrock of the global economy.”
