Houthi attacks in the Red Sea: what are the consequences for global maritime trade?

Romain Rouillard / Photo credit: HOUTHIS MEDIA CENTER / HANDOUT / ANADOLU / ANADOLU VIA AFP 17:00 p.m., December 20, 2023

This is collateral damage of the conflict between Israel and the Hamas terror movement. For several weeks, navigation in the Red Sea has been made impossible by the Houthis' incessant attacks on commercial vessels, accused of having links with the Jewish state. The Yemeni rebel movement, an ally of Iran, is targeting all boats passing through the Bal al-Mandeb Strait, which separates Yemen from the Horn of Africa. A few weeks ago, a dramatic video showed gunmen descending from a helicopter onto a boat owned by an Israeli businessman and forcing the crew to surrender. Faced with the risks involved, several shipowners, including France's CMA-CGM, have announced that their ships will now avoid the area. British oil giant BP has also said it is suspending all transit through the Red Sea.

#Yémen is how the Houthis, with the means of the Yemeni state, committed an act of maritime piracy in the Red Sea on 19.11 against the cargo ship owned by an Israeli businessman. This is part of their support for #Hamas#Gazapic.twitter.com/x0uvNpfz77

— Wassim Nasr (@SimNasr) November 20, 2023

"Ten more days at sea"

On Tuesday, the United States, through the voice of the Secretary of Defense, Lloyd Austin, announced the formation of a coalition of ten countries supposed to keep the threat of the Houthis at bay on this busy maritime route. For their part, the Yemeni rebels responded by assuring that the attacks will continue "whatever sacrifices it costs us".

After several weeks of lockdown, the economic repercussions are already numerous. Ships have no choice but to make a long detour to connect Asia to Europe, where the passage of the Red Sea and then the Suez Canal offers considerable time (and money) savings. "Rounding Africa, by the Cape of Good Hope, means ten days more at sea. It is therefore an additional cost for shipowners who will pass it on," predicts Pierre Cariou, a professor at Kedge Business School and a specialist in the economics of maritime transport. At the same time, these ships will save on the Suez Canal, estimated at $600,000 for each crossing. "But the boats will be used for longer, so it's going to eat away at those savings. Not to mention the increase in fuel costs," the expert adds. In total, the increase in the cost of transport would be between 10 and 20%.

Towards a rise in oil prices?

Oil prices could also rise significantly if the blockade continues. In addition to commercial ships, many oil tankers use this sea route on a daily basis. The price of a barrel of Brent crude was revised upwards on Tuesday evening, in the face of the Houthis' stubbornness to continue their operations. Oil shipments through the Bab Al-Mandeb Strait accounted for about 12% of total oil shipped by sea globally in the first half of 2023, according to a note from S&P Global Commodity Insights.

>>

SEE ALSO - The Canopée, the world's first sailing cargo ship, will transport the parts of the Ariane 6 rocket to French Guiana

Added to this is the disruption of supply chains, which is likely to lead to significant additional costs, but also to delivery delays. "These ships, which have to go through South Africa, for example, will instead go to ports in northern Europe. And then it's a question of how to get those container ships back to Italy or Greece. Transit time will increase and, for importers, the cost of immobilizing stock will be higher," says Pierre Carou. On the other hand, the risk of shortages is ruled out by specialists. "There is no cut. We simply take the longest route. Between 1967 and 1975, the Suez Canal was closed and ships circled Africa. It's doable, but it requires more boats, we tire the crews and this has an economic cost," says Paul Tourret, director of the Higher Institute of Maritime Economics.

"A lot of goods are already there"

Moreover, such a blockage at this time of year is less detrimental to the global economy. "It's a few days before Christmas, which means a lot of goods, especially toys, are already here. We were already supplied two months ago, at the peak of demand," explains Pierre Cariou. In general, due to the sluggish global economic context, demand in Europe has not experienced spectacular surges in recent months, says Paul Tourret.

However, the increasing number of obstacles to navigation has left importers and exporters uncertain about traditional shipping patterns. "There was already the blockage of the Ever Given a year and a half ago (a container ship that got stuck diagonally in the Suez Canal), the passage of the Panama Canal is becoming more and more difficult because of the drought. All of this reinforces what we have seen emerging since the pandemic, which is the vulnerability of our supply chains and these long journeys. So for shipowners, this is not good news because importers and exporters will inevitably end up questioning these patterns. Every two or three months, there is a new event," concludes Pierre Cariou.