The terror attacks by the Iranian-backed Houthi rebels in Yemen has continued now for three weeks largely unchecked. The attacks have even escalated over the past week with three ships hit on the same day: the Unity Explorer container vessel, owned by Danny Ungar's (the son of Rami Ungar) UK based Dao Shipping; the Sophie 2, owned by a Japanese company and unconnected to Israel, and the Number 9, owned by a German company and leased by a Chinese company, and which was also unconnected to Israel.
Estimates are that the Houthis thought the Number 9 was an Israeli ship because ZIM Integrated Shipping Services Ltd. (NYSE: ZIM) had leased it until three years ago. It was initially reported that the ship was badly damaged and the ship's captain had announced that the boat was taking in water and could not continue on its path but it now appears that the ship is about to enter the Suez Canal and is unharmed.
Israel has approached several Western and Arab countries about setting up a designated task force and has been occasionally helped out by the US Navy but the threat is far from being removed.
US National Security Advisor Jake Sullivan has also called for the establishment of a naval task force and there are reports that British and Japanese warships are heading for the problematic Bab al-Mandab strait, the narrow entry to the Red Sea, offshore from Yemen, which offers the only southern access to the Suez Canal. Reports say that Sullivan is holding talks on the matter with interested countries that are likely to continue for some time.
Shipping companies are not waiting for such an international task force and have meanwhile rerouted many of their vessels away from the Red Sea and Suez Canal and around the southern tip of Africa instead - adding 13,000 kilometers and 10-14 days to their schedule and hiking up the cost of the cargo onboard.
According to Israeli company Freightos, which has developed a digital platform for management of shipping costs through algorithms, at least five Israeli ships have already rerouted away from the Suez Canal around Africa's Cape of Good Hope including two Maersk container vessels leased from Idan Ofer, two ships bringing vehicles owned by Rami Ungar, and one ZIM container vessel.
ZIM rerouted the Europe
At the end of November ZIM rerouted the Europe container ship, which can carry up to 5,600 containers, after it left Boston on the east coast of the US for Malaysia. Instead of sailing via the Mediterranean and the Suez Canal, the ship turned back off the Algerian coast and will sail around Africa instead.
The ZIM Europe's change of route came as a surprise because it was not due to call in at an Israeli port and is part of ZIM's ZXB service in which a fleet of 14 vessels regularly sails from the US to Malaysia via Mexico, Colombia and China, either westwards through the Panama Canal or eastwards through the Suez Canal. Another ZIM route, ZMP, which connects ports in China with Turkey has already announced that its 12 ships won't pass through the Red Sea. This will cause supply chain delays the ships will presumably circumnavigate Africa.
Both the Lisa and Pangani have been rerouted
Two other Israeli container vessels that have been rerouted are the XT Group's Lisa and Pangani, which are both leased tro Danish shipping giant Maersk. The Pangani was sailing to Oman but following the recent attacks decided to India and transfer its containers to another Maersk ship sailing to the Gulf and on its way back it will not anchor in Dubai. The Lisa, which sails between East Africa and India, immediately unloaded its cargo in Oman and continued to East Asia to undertake different routes.
It has also been announced that two vehicle carriers owned by Rami Ungar's Ray Cars have rerouted after deciding not to use the Suez Canal.
Judah Levine, head of research at Freightos told "Globes" "The Suez Canal is responsible for 30% of maritime container traffic. Between 50-60 ships per day sail through it, or 19,000 per year. The incidents in the Red Sea is diverting ships around Africa at the expense of the Suez Canal but we have not yet noticed a significant fall in merchant traffic in the Red Sea in global trade that is not related to Israel."
At the same time, shipping companies will not be entirely hit by circumnavigating Africa. They will save the transit fee in the canal, which ranges from $400,000 to $700,000, and will be able to more easily deal with the surplus of ships at present, by diverting them to slower routes, and keeping more ships afloat.
"Prior to the conflict with the Houthis, some ships would slow down to save fuel, but operating them nevertheless allowed the shipping companies not to keep vessels unused," says Levine.
However, transportation costs have already risen following the Red Sea attacks, and a lull is not expected as long as the fighting continues. According to Freightos data, the continuous fall in freight prices, due to the excess number of containers and ships purchased by shipping companies after the Covid pandemic, has been halted by the events in the Bab al-Mandab strait. International trade with Israel has suffered the brunt of the damage, while freight prices on lines between Asia and the Mediterranean rose 9% in November, and freight prices between China's ports and Israel has risen between 16% and 36%.
Insurance prices have also risen
Insurance prices for shipping goods to Israel have also risen. ZIM has added between $20 and $100 to insurance for each container, and German shipping company Hapag-Lloyd has hiked insurance fees for each container from Mediterranean ports to Israel by $80.
Levine says, "There is no doubt that all of this will increase prices of products and goods in Israel and a rise towards $2,000 per container that reaches the Mediterranean Sea is realistic. However, these are still low prices compared to the prices asked during the Covid pandemic. In January 2022, the cost of transporting a container from Asia to the Mediterranean Sea was $15,000 while in January this year it was $4,000."
Published by Globes, Israel business news - en.globes.co.il - on December 7, 2023.
© Copyright of Globes Publisher Itonut (1983) Ltd., 2023.